ASOS’s decision to move to the London Stock Exchange after 20 years on the Alternative Investment Market marks an interesting shift for one of AIM’s biggest hitters. Originally floating on AIM in 2001, ASOS was among the largest companies on the exchange, with an equity value of £2.2bn.
ASOS has been hit by recent supply chain issues, with a hike in transport costs and disruptions, cutting its share price by half in 2021. The desire to rectify this immediate issue, as well as drive longer term growth and attract funds from a global pool of investors, has led to the decision to jump from the AIM to the LSE.
This situation highlights what many are beginning to see as the main issue of junior markets like AIM. Although ASOS was able to build a successful company while listed, they’ve reached a pivotal point where growth is no longer possible without graduating to a main market.
For many smaller companies looking to expand, grow and access liquidity, AIM might seem like a good option, but the market has long had a mixed reputation for companies that have chosen to list there. Many businesses have seen themselves crash and burn, whether as a result of poor planning, inexperience or plain mismanagement, and their bad experiences have only added to AIM’s perception as a less-than-safe bet for CEOs.
On top of this reputational issue, companies looking to list on AIM must also grapple with the fact that they would need to put in main-market level admin, compliance, and legal costs only to access junior-market benefits. Understandably, this value proposition might not sit right with business leaders looking to take their company to the next level of growth.
In fact, our latest research found that overall, there is a desire among finance leaders to ease off on the rush to a public listing. A vast majority (87%) of CFOs and finance directors say that they intend to keep their company private for as long as possible and hold off on an IPO. Unsurprisingly, it’s the administrative burden and desire to keep control of their company that is driving this.
So, if companies that once would have considered listing on AIM are now thinking twice, what does the future look like for private capital and junior markets?
Could the answer lie within the recent surge of blockchain technology? By embracing digital assets, we could completely eradicate the administrative burden behind making liquidity decisions and open up private companies to more options. The largest example of this shift is tokenised securities – enabling businesses to take advantage of new fundraising and liquidity options through blockchain ecosystems.
For the ASOS of 2001 the AIM market might legitimately have been the best option for growth, but for a similar company today, technology has provided many options for large private companies. This doesn’t bode well for junior and alternative markets such as AIM. With all of the technical advancements and changes to the market mentality as a whole, how relevant will AIM be in five years time?
There is still a place in the future for alternative markets, but they will have to embrace the change; evolve or die. With new advancements and more agility than main markets, AIM has the opportunity to integrate these new technologies directly into their marketplace offering and stay a step ahead of the curve.
Proof of this shift is evident already, with $10 billion of private share and debt instruments currently being digitally managed on Globacap’s platform alone. Over the next five years, we anticipate that the lines between private and public markets will continue to blur, with more companies choosing to stay private and access secondary liquidity for their investors, over listing on wavering junior markets.
Author: Myles Milston
#ASOS #LSE #AIM #Liquidity #PrivateCapital #JuniorMarkets #Blockchain #DigitalAssets #Tokenisation #IPO #PublicMarkets