Lack of liquidity is a common criticism of London’s AIM, however, it compares quite well to the most appropriate U.S. analog, the third (lowest) tier of NASDAQ, the NASDAQ Capital Market. Nevertheless, if a London AIM-listed company is confident about its future prospects, it desires some level of liquidity in order to obtain a fair valuation.
The key benefits of positive liquidity are:
- London AIM investors are satisfied with their returns
- Less dilution from secondary offerings on London's AIM
- Attractiveness of London AIM-listed shares to acquisition targets
- Increased morale and excitement about the company from its employees and board who often own London AIM-listed shares and/or hold share options
The reasons for a lack of liquidity on London's AIM are often company specific and not obvious. Upon engagement for a liquidity study, I would work with executive management, and perhaps the board, as well as a number of the company's professional advisers in order to formulate actionable solutions.