Small Cap fundraising on the AIM market3 May 2025 11:13
The London AIM market is a good place for small United States businesses to get interest free money
Is the London AIM market a good place for small United States businesses to raise cheap capital when they are too small to get a listing in New York and banks would charge too much interest for loans? The business can be a sound proposition which will ultimately produce a profit, not a total con. The “cheap money” comes with the share price rise created by “buzz” amongst investors who buy in at a price that can’t be sustained because the number of shares in issue is too large to merit a high valuation vis-à-vis the size of an albeit sound and profitable, but small, business. When investors realise this and sell out, the share price falls to near its “penny share” IPO value. Then the directors can buy back large parcels of shares for much less than they sold them for. They then own almost outright a productive small-cap business and don’t have the banks on their necks for interest payments.
The AIM investors move on to the next hype.
Look what happened to a helium startup on the Vancouver Stock Exchange with an IPO about six years ago. The “penny share”, with a lot of positive reporting in the business press, rose sharply on the Vancouver stock exchange .The peaking share price was a source of interest-free development capital for the company, as it should be. Then it declined drastically and bumped along the bottom and nothing much seemed to be happening to lift the gloom. But when you look at the trading history of the stock, “persons with significant control” in the company have been buying up large blocks or the stock, 40,000, 20,000, now and again for some reason. It’s as if they knew the business was not a dud. Now, finally, there has been a report that a first shipment has been made. So, maybe, the penny stock investors should have held on. Has the company strung the public along long enough with no news or bad news for the principles to reacquire the stock cheaply before releasing good news? Have they finally got a viable company, bought and paid for with the penny share investors’ cash instead of expensive merchant bank money? Is that how you do it? Is there a pattern here?