AIM could be described as a low touch entry point for smaller companies with market valuations of up to $600m or thereabouts. The NASDAQ Composite Index provides a comparable marketplace called the NASDAQ Capital Market with similar objectives to AIM. These objectives are to promote growth companies on their way, eventually, to the main boards being the NASDAQ Global Market and Global Select Market, which are akin to the London Stock Exchange Standard Listing and Premium Listing respectively.
Nexfin has experience with both AIM and NCM. Nexfin observes that US investors supporting an NCM flotation require a strong bias towards future operations taking place in the USA. Putting it another way, the business plan must display plans to develop significant business in the USA.
The London Stock Exchange, of with AIM is a part, describes itself as being an international market place with no specific geographic allegiance. AIM investors are, however, attracted to companies which view London as being a springboard into European and global expansion.
Base entry requirements
| AIM | NCM | |
| Minimum market capitalization | None (although Nexfin recommends an absolute minimum £10m | $50m (with the market value of shares in public hands of at least $15m) |
| Trading history | None (although Nexfin recommends at least a year) | Minimum of 2 years, with the net income from continuing operations in either the past fiscal year or two out of three of the past fiscal years must be at least $750k |
| Minimum number of shares in issue on admission | No minimum (although Nexfin recommends sufficient to promote liquidity) | 300 shareholders holding in total at least 1 million shares |
| Minimum share price on admission | No specified price | $4 per share or higher |
| Percentage shares in public hands | No minimum (although Nexfin recommends 25% to promote liquidity) | 30% minimum |
There are 3700 companies listed on the NASDAQ Composite Index (being the total number across the NASDAQ Capital/Select/Global Select markets). NASDAQ does not specify the number listed on the NCM.
- The LSE including AIM has 2900 listed companies. 820 of these are AIM companies
- The total valuation of all listed companies in the USA is significantly greater than in the UK. NASDAQ alone has a total market value of $19 Trillion ($19,000,000,000,000) and the LSE has a total market value of $4.5 Trillion ($4,500,000,000,000)
- Average market capitalization per company on the LSE is $2 billion with the average on AIM at $100 million. The average market capitalization on NASDAQ is over $5 billion. There is no available information providing details of the NCM market value
- The transition point for companies wishing to move from AIM to NASDAQ is thought to be when a market capitalization of $500 million is achieved
AIM provides a bridge to grow to $500 million; Our relevant observations
- Although the average size of NASDAQ companies is an enormous $5 billion, 75% of these have market capitalizations below $500 million
- AIM investors actively watch their investments and are keen to provide follow on investment when required. The result is that 80% of AIM-listed companies enjoy analyst research coverage. Nexfin estimates that 65% of small/mid cap NASDAQ companies have no research coverage. The evidence shows that U.S. investors don’t know of or care about ‘small’ companies
- The regulatory burden on NASDAQ is disproportionate to the size of the company – Internal and external maintenance costs of listing
- NASDAQ is $2 – $3 million per year
- Exchange Act and SOX impose a high regulatory burden on NASDAQ
- AIM is $250 – $375 thousand per year
- AIM Rules for Companies impose a moderate regulatory burden on its member companies
- Dilution – Generally about the same after the company proves itself and accesses London AIM’s deep secondary offering market
- Ability to use public shares as a currency for acquisitions
- Liquidity on London’s AIM averages 4% per month
- Liquidity on NASDAQ averages 12% per month for companies with market capitalizations below $500 million
- Liquidity on NASDAQ is solidly above 20% per month at market capitalizations above $500 million
- Daily volume on NASDAQ 4.4 billion shares (9 September 2022) and AIM 3.6 billion shares (2021 average daily)
- US companies spend a whopping 166% more on legal services than their global counterparts — roughly 0.40% of their revenue (UK 0.24%) while Fortune 500 spend 0.96% of revenue
- New Wave of Securities Class Action Suits Targets U.S.-listed Asian Companies
- Every AIM company must have a Nominated Adviser (NOMAD) and Broker (no similar requirement exists for NASDAQ) – quite often the NOMAD and Broker will be under the same roof. They actively cooperate with the clients over the years to provide financial advice, help to promote and develop the story and seek opportunities for secondary fund raisings. NOMAD and Broker responsibilities include:
- Assessing investor interest at the time of admission and in any subsequent fundraising
- Conduit for relations with shareholders
- Ongoing advice on market and trading-related matters
- Pricing of shares and other investment opportunities
- Often have institutional research department for providing investors with the necessary analysis
- Managing any share overhangs coordinating with potential institutional investors
