The number of initial public offerings (IPOs) on the Alternative Investment Market (AIM) has plummeted to just eight in the year to the end of September 2024, down from 12 last year and the lowest since the five IPOs in 2007/08, says national accountancy group UHY Hacker Young.
Only £88.6 million was raised through AIM IPOs in 2023/24, just 1% of the £8.83 billion raised during the market’s peak year of 2006/07. The steep drop in AIM IPOs highlights a challenging environment for smaller companies looking to raise capital.
Uncertainty surrounding the tax status of AIM shares is undermining the funding environment on AIM.
Concerns have grown that the Government might scrap the Inheritance Tax (IHT) exemption that exists on UK companies that are listed AIM shares. This has made private investors more cautious about investing in AIM shares. Without the interest of private investors the share prices of AIM companies would fall due to lower demand and liquidity.
UHY Hacker Young says that concerns about the tax status of AIM investments comes at the bad time as higher interest rates had already undermined investor interest in AIM shares. Smaller companies often suffer more from high interest costs than larger companies.
Without the IHT relief attached to investing in AIM shares the market could face greater competition from PE – with companies deciding to stay private rather than list on a stock market.
The IHT exemption attached to AIM shares was introduced to encourage private companies (which benefit from the same tax break) to list on AIM and scale up – rather than stay private.
Colin Wright, Chairman of UHY Hacker Young: “Speculation about the future of tax relief on AIM shares is very unhelpful for the market.”
“Now that interest rates are finally falling that should help AIM.”
“We hope the new Government will make it clear that they are not planning to subject AIM shares to IHT. That would lift a big cloud from the UK’s biggest growth company stock market.”
“More management teams at growth companies now look toward US markets as they can offer much higher valuations for companies. PE and VC investors can also outcompete AIM due to lower compliance and reporting burdens. For a lot of fast-growing companies, the IHT exemption of listing on AIM has been that advantage.”
The number of companies on AIM stood at 704 at the end of August 2024, down by 7% from 753 at the end of 2023 and by 58% from its peak of 1,694 companies at the end of 2007.
Number of IPOs on AIM (2006-2024) – lowest since 2008/9
