Will Aim be able to make up lost ground?

Aim, the junior stock market in London, has lost investor appeal due to scandals and an impending inheritance tax blow in April

Will there be a change?

Not many are celebrating the 30th anniversary of London's Aim market. According to Richard Evans of Fidelity International, the goal of creating an "accessible" space to support the expansion of small businesses in the UK in the 1990s has mainly not been fulfilled.

Listings on the junior market of the London Stock Exchange have dropped below 700, from a peak of 1,700 in 2007. Only ten firms joined Aim in the year ending in February, while 61 firms left. The last five years have seen a 13 percent decline in the FTSE Aim All-Share index.

Sadly, it has also lost money for the past 30 years "even with dividends reinvested." This is partly due to the "numerous" people who lost money when the .com bubble burst in the early 2000s and long-shot listings by small, high-risk commodity companies.

The market's image has been damaged by too many jerks and "not a few scandals," most notably the accounting issues at Patisserie Valerie bakery, despite a few true success stories. A "disproportionate" number of dishonest "company promoters," including a few "outright fraudsters," were drawn to the company by the light-touch regulation that was meant to be a plus.

According to Ian Conway in Shares, listing standards have been tightened in response, but the Aim market is now less desirable due to the closing regulatory gap with London's main market. The CEO of an unnamed Aim mainstay claims that maintaining a quote costs "around 750,000" a year, including exchange fees. Small management teams' time is being consumed by increasing red tape.

All this trouble just to get listed on a market with much less liquidity than the London main board, where the bid-offer spread on many Aim stocks can be between 10 and 15 percent on a good day, while on the senior market it is only "fractions of a percentage point." In April, Aim inheritance tax breaks will be cut in half, which is another setback.

Extreme measures to correct Aim.

Aims' problems have gotten so bad that some people are looking for drastic fixes. Last year, a think tank suggested combining the main market with the damaged Aim brand. According to Rosie Carr of the Investors Chronicle, however, "Aim is worth saving". Despite its shortcomings, it continues to be a unique platform for fostering British growth companies. In addition to supporting 410,000 jobs, aim firms generate £5.4 billion in tax income. The UK already faces challenges in assisting promising start-ups with their expansion. Eliminating one way to retain creative companies on these shores would backfire.

Though the risks are high, historically smaller and midsized shares have outperformed the blue chips, providing a 6 percent annual performance premium between 2009 and 2021, according to James Henderson in the Financial Times. Could Aim investors benefit from a turnaround? Large-cap outperformance may not continue as it has recently. Although Aims' difficulties should not be minimized, "we might reasonably expect some reversion to the mean."