Aiming high

The decision to launch TechMARK last year was seen by many as a direct threat to the Alternative Investment Market, the London Stock Exchange's market for "young, growing entrepreneurial companies". This is not the case, according to Neil Brasil, the AIM spokesman. "We have always seen the two markets as complementary. TechMARK is part of the main market and has been described as being a pure technology index. AIM, on the other hand, has a broader appeal."
Founded in June 1995, AIM has had more than 450 companies listed altogether, many moving on to the major listings. The 350-plus companies currently listed have a market capitalisation of more than £10bn (e15.9bn). These are predominantly British, with only a smattering of overseas companies seeking a listing. AIM also boasts more than 60 nominated advisers.
As the appeal is directed towards young companies that may find capital more difficult to come by, the figures for raising capital since inception make interesting reading, as does the activity on the market. With almost 1.3m bargains and £3bn raised for the companies the market can claim to be a success.
"There has been massive interest among private international investors," says Brasil. "Although the market has definitely benefited from the general interest in hi-tech companies, it is the investors who finally drive the market."
Latest available figures show those private investors accounting for more than one third of shareholdings, up from 23% last year. Interestingly, institutional investors have been leaving the market at an even greater rate than the former are entering. They represent 19% of ownership of AIM companies , down from 37% last year. Venture capitalists and employees have maintained last year’s level of interest, while directors/founders have increased their holdings in their own companies at the expense of institutional investors.
But institutional investors have been fleeing the market virtually since its inception, according to Julian Palfreyman at Winterfloods in London. "We have seen such investors selling original holdings at relatively low prices and then, when a stock takes off, buying back in at very high prices because they feel they cannot afford not to be involved."
The interest in AIM has seen the index increase by more than 130% since the beginning of last year. Indeed last November saw the index increase by 34% month-on-month. Significantly, that month also included a year-to-date high, finishing November 29 at 1652. Again, Palfreyman sounds a warning. "November last year saw more bargains than the whole of the previous two years, on the back of the boom."
Such small companies are naturally attracted to the AIM because of the regulations. As little as 5% of the company can be floated as opposed to the 25% required by the major markets. Thus a host of director-owned companies come to the marketplace. Palfreyman also suspects that a number of shell companies have been acquired by entrepreneurs to prepare market attacks.
The impact of private investors also begs the question of the use of new technology in investment. "On-line traders have had a massive impact," says Palfreyman. Advice and tips on the net attract an irrational response, with people following different tipsters. "The main problem with this is that is it is totally without regulation," says Palfreyman. The end of last year saw some profit taking, but analysts suspect this is merely a blip and that after a few weeks’ consolidation the index will pick up again. Kevin Hall

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