The Alternative Investment Market: Helping Small Enterprises Grow Public

The Alternative Investment Market (“AIM”) of the London Stock Exchange is a twenty-year experiment in light securities regulation for small companies. The empirical literature shows that the AIM underperforms premier exchanges; however, this literature should not be taken as evidence that the AIM experiment is a failure, rather that the AIM serves a unique niche. In contrast to companies listing on premier exchange, those listing on the AIM do not undergo significant changes in ownership, control, and leverage after an initial public offering (“IPO”). Instead, these changes occur over time, if the company grows. This Article argues, based on the empirical literature, that the AIM fills a niche for companies and investors that fits between a premier exchange listing, which is difficult to attain, and remaining completely private, even aided by an issuer sponsored secondary market. From this middle ground, companies may successfully use the AIM as an on-ramp to a listing on the Main Market of the London Stock Exchange; however, less than one percent of companies are able to make this transition. Even if companies do not have the Main Market in their sights, the AIM serves as a structured liquidity market for existing investors. The Appendices to this Article present a detailed overview of the empirical findings from each of the reviewed studies.