Secondary funding on London’s Alternative Investment Market (AIM) has dropped 33 per cent in the last year alone, as more bad news piles on the junior market.
While IPOs have dried up on AIM, secondary funding hasn’t fared much better: Only £1.2bn was brought in through secondary fundraisings over the last year to 31 August, compared to £1.8bn in the previous year.
This is part of a continued decline from a high of £6bn in 2021, meaning that fundraising has dropped more than 80 per cent in just three years, data from UHY Hacker Young revealed.
In the last year, only one company managed to raise more than £100m through secondary fundraising on AIM.
“One of the great successes of the AIM market has been the ability of companies to raise money after their IPO to keep powering their growth,” said Colin Wright, partner at UHY Hacker Young.
“That element of AIM hasn’t been working recently.”
Worries over AIM have persisted for some time, but have rapidly increased over rumours that the government may cut business relief on AIM stocks at next month’s budget.
Edgar Randall, managing director of analytics firm Dun & Bradstreet UK&I, explained that moves to remove business relief could also signal the government shifting “away from efforts to make Britain more competitive and investable”.
“Growth markets are vital for fostering innovation and job creation, and undermining their capital base could have a severe impact on investor confidence,” he added.
So, are the fears over tax hikes on AIM causing the fall in funding?
“You can’t blame [secondary fundraising falling] entirely on possible tax changes for AIM shares but the speculation isn’t helping,” said Wright.
“The AIM market is a vital part of the UK’s efforts to create growth companies so reducing the tax breaks attached to it would be counterproductive.”
“I’m pretty sure the stock exchange would like the government to clear the air and confirm they have no intention of changing the tax status of AIM shares.”