![]() The difference between the two is the “spread”, which is how they make their money. Market makers offer both a buy and a sell price. The market maker facilitates liquidity – ensuring that the stock can be bought and sold – by offering a two-way quoted price on the stock they are dealing in. On the SETSqx platform, by contrast, trading is done via market makers. On the main market’s Sets platform, dealing is done entirely via order book – the constant stream of buy and sell orders for large, liquid stocks means that buyers can be automatically matched up with sellers. However, many stocks on Aim tend to be lower in value and less liquid and so trade on the London Stock Exchange’s SETSqx platform. The other key player you’ll encounter is the market maker. The trouble is, a Nomad is paid by the company itself and so poacher and gamekeeper are one and the same. It is the Nomad’s job to ensure that every announcement the company makes via RNS (the official channel for companies to communicate to the stockmarket through the London Stock Exchange) is fair and accurate. If a company announces that its Nomad has resigned, it’s a cause for concern – the company only has a month to find a new Nomad, or else it will be forced to delist. The Nomad (“nominated adviser”) is supposed to be an independent corporate entity that ensures the rules of the listing are followed accordingly. The main players on Aimīeyond the companies themselves, there are two key players Aim investors should be aware of. This issue is compounded by the fact that some brokers do not keep clear insider lists – and that nobody has been charged for insider trading within the last five years. If an insider finds out about the equity placing plans and tells their friends down the pub or sells out themselves, the price can fall below the placing price – forcing the fund raising to be renegotiated for the worse, or even be cancelled. In small-cap stocks that are traded on SETSqx (the trading system for less liquid stocks – more on that in a moment), it only takes a few thousand pounds’ worth of stock to move a share price. So news of a pending placement can easily leak. There is also a big difference as to how much our company’s coffers will be boosted if it places those shares with investors at 80p (£80,000 raised) and at 50p (only £50,000).Īnother risk is that trading in an Aim company’s shares is not suspended when a fundraising is planned. But if the company sells another 100,000 shares, our stake would halve from 10% to 5%. Here’s a simple example of how dilution works. Thus a conflict of interest arises between existing shareholders and the new ones: the former want to see the company sell its shares at a higher price to decrease dilution and minimise its need to return to the market at a later date for more (the lower the share price, the less cash the company will receive), whereas the latter are keen to get the best value for money. The problem is that the new shares are usually sold for less than the prevailing market price, to attract new investors. So rather than pile in, be patient and do your research. Chris Boxall of Aim specialists Fundamental Asset Management notes that a company’s Aim admission document is “essential reading for any prospective investor” and yet it’s one that many ignore. But if you are willing to get your hands dirty and do the work, the rewards can truly be life-changing. It’s a market of stocks, rather than a stockmarket – if you want to make decent returns, you have to be picky. Given this wide variation in returns, Aim is not a market for index trackers. Diamonds in the rough such as Domino’s Pizza and online fashion dynamo ASOS have delivered staggering returns for shareholders. ![]() Yet amid all the blue-sky visions and dubious schemes, there have been several success stories with solid business models. These two rules mean there are many unproven business models on Aim. Companies need not have a trading record and there is no minimum market capitalisation (total shares in issue multiplied by the share price). There are a few key differences between Aim and London’s more stringently regulated main market. ![]()
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