Strategic Analysis: AIM vs Main Market Listing Considerations
- Yifat Steuer
- Oct 22, 2024
- 3 min read
Updated: Feb 6
Over the past few weeks, I’ve been engaged in in-depth discussions surrounding UK exchanges, and I wanted to share some key takeaways. With recent regulatory developments at the LSE (London Stock Exchange) and the anticipation of further shifts in fiscal policy, it’s crucial for companies to strategically assess their options between listing on AIM or the Main Market.
This analysis details the critical factors influencing market choice, particularly concerning capital-raising strategies. (Note: While the recent changes in the London Stock Exchange regulations, effective as of July 2024, are factored in, and upcoming fiscal policy updates may introduce further adjustments, the fundamental distinctions remain clear.)
Exchange overview
What is AIM?
AIM (Alternative Investment Market), established in 1995, serves as the LSE’s growth market, designed for smaller, dynamic companies seeking access to public capital. Known for its regulatory flexibility, AIM provides a less prescriptive, more scalable framework, making it ideal for early-stage, high-growth, or speculative companies. It’s a preferred choice for businesses looking to fuel expansion through public funding while keeping regulatory constraints to a minimum. AIM can be a launchpad for future progression to the Main Market.
What is the Main Market?
The Main Market is the primary venue for the LSE’s most established and largest companies. It upholds the highest regulatory standards, including stringent corporate governance and investor protection, offering businesses enhanced visibility, liquidity, and access to institutional investors. Companies listed on the Main Market can also gain inclusion in major indices like the FTSE 100 or FTSE 250, further elevating their profile and attracting substantial investment interest.
Key Differences in Market Structure and Positioning
AIM and the Main Market represent distinct paths tailored to a company’s development stages. Each platform provides access to public capital, but the structural, regulatory, and investor engagement differences significantly impact a company’s listing strategy.
Quantitative Listing Requirements
Capital Requirements
Main Market: Requires a minimum market capitalization of £30 million, with at least 25% of shares in public hands (free float), alongside a clean working capital statement confirming 12-month sufficiency.
AIM: Has no formal minimum market cap or free float requirement, although working capital adequacy for 12 months is still essential. Some sectors may benefit from adjusted working capital criteria.
Financial Track Record
Main Market: Requires a three-year audited financial history, with at least 75% of the business supported by revenue-earning activities. Companies must control most of their assets for this period and demonstrate independent business operations.
AIM: Does not impose a mandatory trading history but evaluates financials through NOMADs, with specific allowances for certain industries, such as natural resources. Growth potential is often prioritized over historical performance.
Regulatory Framework and Corporate Governance
Main Market
Compliance with the UK Corporate Governance Code is non-negotiable.
Companies must establish formal board committees and document risk management frameworks.
Internal controls and governance structures must be robust and well-documented.
Require a Sponsor
AIM
Most AIM companies adopt the QCA Corporate Governance Code, which allows for proportionate governance arrangements.
NOMADs guide companies through flexible governance frameworks, adapting structures as the company matures.
Transaction Oversight and Requirements
Main Market
Shareholder approval is required for Class 1 transactions, with oversight from a sponsor for significant deals. Related-party transaction regulations are also in place, requiring detailed circulars for material changes.
AIM
AIM streamlines transaction approvals with reduced classification and documentation. NOMADs (Nominated Advisor) guide companies on materiality thresholds, allowing greater flexibility in executing substantial transactions.
Strategic Market Considerations
Investor Access
Main Market: Attracts institutional investors, including tracker funds and mandates from large institutional portfolios, alongside broad research coverage.
AIM: Appeals to growth-focused investors, including Venture Capital Trusts (VCTs) and retail participants, with specialized analyst coverage typically driven by sector-specific NOMADs.
Liquidity and Share Price Formation
Main Market: Higher daily trading volumes and more profound order books contribute to lower volatility and more stable price formation.
AIM: Liquidity often relies on market makers, with smaller order books leading to higher volatility, particularly for early-stage companies.
Conclusion
Selecting between AIM and the Main Market requires a clear alignment between a company’s long-term goals, operational maturity, and capital-raising objectives. AIM offers an attractive, flexible framework suited to early-stage or high-growth companies, while the Main Market provides greater access to institutional capital and liquidity—albeit at the cost of increased regulatory obligations.
Ultimately, the decision should reflect key strategic factors such as:
Corporate growth objectives.
Operational and compliance readiness.
Capital needs and investor base.
Long-term positioning within the market.
AIM serves as a springboard for growth for many companies, while the Main Market remains the ideal destination for those ready to engage with a broader institutional investor audience.
Steuer Consulting provides comprehensive IPO advisory services across both markets, incorporating detailed strategic analysis and execution support.
Disclaimer - This analysis reflects current market structures as of October 2024, subject to ongoing regulatory evolution.
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