Well in very very basic terms, AIM shares are simply shares of companies that are listed on the Alternative Investment Market of the London Stock Exchange. The AIM is a sub-market of the main exchange which has a less stringent regime of regulations each company listed there need to adhere to in order to maintain their listing.

Pre 1995, companies that wished to raise capital by issuing shares to the general public only really had the option of floating on the London Stock Exchange. However in order to do so, there were and still are strict regulations a company needs to comply with to be allowed on the main market. This obviously incurrs major cost and resources in order to bring accouting practices amongst other things up to the required standard, aswell as fees associated with taking the relevant advice to guide them to a successful floatation. Hence the number of small companies that were able to make a success of floating on the LSE was relatively small indeed.

In comes the Alternative Investment Market. As the name suggests, this “sub-market” of the LSE gives an “alternative” to smaller companies who wish to floar shares with a more flexible regulatory system than on the main market.

Since its launch in 1995 it has became the worlds most successful growth market, helping over 3,100companies raise more than £33 billion in new capital and another £34 billion in further issues. The market currently has over 1,200 companies listed which have a combined market value of over £60 billion.

The market, with its flexibility of less regulation and requirements such as number of shares issued etc, has provided a useful platform for well performing companies to then progress to join the main market. It is worth pointing our however that some of the companies on the main market have in turn transferred to the AIM because of the flexibility, aswell as benefits for the investor (significant benefits : – more in “For the Investor”). Comparitively there is generally less liquidity to the shares traded on the AIM so there may therefore be a delay between making your bur or sell order and it actually being matched.

As the companies that are listed on the AIM are of generally a smaller size, from Venture Capital backed & recent start ups to more established companies, there are obviously higher risks involed for a potential investor.

But as ever, with higher risks we may also get higher rewards!

Stay tuned.