another attack on the AIM market. Poor old AIM, it cannot live down its reputation, forever sealed years ago. The thing is that companies on AIM are often small and somewhat poorly run. You can't excuse a Desire Petroleum for potentially misleading investors, but you can many other firms for running into business model difficulties.
The attack from the big money managers is always that AIM companies are poorly regulated through the LSE and this lax regulation allows crooks to abound.
Yet AIM companies are where retail investors have a chance; the stocks are under researched so if you bother you may find an angle that big city houses miss. Companies are tied to events and not the FTSE, buy many FTSE100 shares and you may as well have a FTSE tracker for all the difference it will make.
Many AIM companies these days are natural resources companies, they are looking to develop mines and oil resources in the midst of the long-term commodity boom; its high risk, high reward stuff. But the rewards are there, for every company that fails and lose shareholders money there are some who make fabulous rewards. GKP, subject of the last post, was under 10p just 2 years ago and is now nearer £2.
Of course money managers also have some ulterior motives here, they have large amounts of money to manage which means their risk weighting in small companies does not add up for them. Also they want even more funds under management and are not very happy when private investors want to chance their own funds rather than invest in their huge, low return vehicles; not very good for one's bonus after all.
AIM's success is also shown by some recent moves in the Spreadbetting world. The companies are de-listing AIM shares if possible - see CMC Market's this week. CMC say due to volatility; logic says they are losing their bets to canny investors and bookies don't make markets to do this, hence they are closing it. That is not telling me that AIM is a failure, it is saying that finally retail investors are gaining power against the City. With the power of the internet to research and free technical analysis tools, small investors can be equipped to do better against the "Market Machine" than ever before; it's still not a fair fight, but is a vast improvement on past years. The internet is a great leveller throught delivering access to information.
The calls of 'risk' and 'casino' are not coming in the main from small investors, but from big institutions (and America, where the NYSE has had no similar success). Of course regulation can always be improved and the LSE can look at this, but AIM is an interesting market and a force for good for smaller companies seeking finance for risky ventures. Also, plenty of main market companies tip up too, look at Connaught or Jarvis recently, the idea that it is only AIM that is high risk in recessionary times is delusional.
The constant sniping of the City Funds and their pals in the media proves it.