The amount of money raised for companies on the Alternative Investment Market (AIM) through secondary fundraisings (i.e. after IPOs) has seen another sharp fall - down 33% in the last year*.
In the last 12 months, just £1.18 billion was raised through secondary fundraisings, compared to £1.8 billion in the previous year. The fall in the amount of money raised could suggest that investors in AIM companies have been less willing to support AIM companies pursue growth plans. This is part of a continued decline from a high of £6bn in fundraisings in 2021.
Investors have been less supportive of UK shares over the last few years with the perceived risks of UK shares having risen since the Liz Truss Budget. More recently investors have begun to worry that AIM companies are going to lose their valuable inheritance tax exemptions. The shares in many AIM companies are not subject to IHT, making them more valuable to private investors. However, speculation has increased that the Government may remove this tax break at the Budget on October 30.
In the last 12 months, only one company managed to raise more than £100 million through secondary fundraisings on the AIM market.
One of the great successes of the AIM market has been the ability of companies to raise money after their IPO to keep powering their growth.
That element of AIM hasn’t been working recently. The amount of money is down sharply. You can’t blame that entirely on possible tax changes for AIM shares but the speculation isn’t helping.
The AIM market is a vital part of the UK’s efforts to create growth companies so reducing the tax breaks attached to it would be counterproductive.
I’m pretty sure the stock exchange would like the Government to clear the air and confirm they have no intention of changing the tax status of AIM shares.
Investor focus has shifted away from AIM towards the US market, where AI-related tech companies have performed well. As a result, many smaller UK companies are struggling to attract the attention of investors and the capital needed for growth and expansion. This has resulted in the valuations of UK listed companies being lower than counterparts on other stock markets and increases the possibility of takeovers of UK companies. Rightmove has recently been a takeover target by Australia’s REA Group.
The new Labour Government has also scrapped plans for the “British ISA” which would have encouraged investments solely in British listed companies. While it was considered to be problematic, so it is not surprising that they have been dropped, the Government does need to find ways to encourage more investments in companies on UK stock markets so that they can remain competitive with other countries.
*Year to end Aug 31st 2024, London Stock Exchange
Amount raised in secondary fundraisings on AIM market 2021-2024
