Is London's stock market the right place for smaller companies or should we abandon it, like many small-caps have been doing with AIM over the past year or two?
Today there were expressions of support for London's listed small-cap scene and a call for companies and investors to stop clinging to the good old days.
A report today, published by New Financial in partnership with Abrdn, Euroclear, Winterflood and the Quoted Companies Alliance (QCA), has called for "a concerted effort across government, regulation, and the industry [to] reverse the ‘doom loop’ and revitalise what should be a vibrant component of UK capital markets".
Entitled 'the future of smaller company capital markets in the UK', the report notes the decline in "virtually every metric" compared to the wider market, including a fall in the number of listed companies valued below £1 billion, a fall in new issues, most of which it puts down to a collapse in demand from retail and institutional investors.
The report suggests the challenges facing smaller companies are common across the wider market: "stemming the exodus of pensions from UK equities; re-engaging retail investors; resetting risk culture and the balance between risk, growth, and stability; or addressing governance and regulatory hurdles".
It says the danger is that smaller listed companies have "fallen into a self-fulfilling ‘doom loop’ of lower demand, lower valuations, lower performance, higher governance and regulatory requirements, and higher cost, which makes the market less attractive for issuers and investors".
But the report said a total decline is not inevitable, citing "plenty of examples" where smaller companies have been thriving, pointing to markets like Australia, Canada, and Sweden.
Earlier, the boss of investment group Kelso Group Holdings PLC also called on the government to provide more support for AIM, calling it "the lifeblood for many small and growing British businesses".
In a BBC-style offering of some balance, let's also hear from Myles Milston, co-founder and CEO of capital markets fintech Globacap, who believes AIM is "no longer fit for purpose".
He says its "persistent lack of liquidity, dwindling funding opportunities, low trading volumes and erratic share price movements" deters other firms from listing and forces many to actively delist.
He says the government’s PISCES framework, driven by LSEG, is "an acknowledgement of the inevitable demise of AIM", as PISCES allows private companies to access the funding and liquidity while avoiding going public.
"Rather than nostalgically clinging to the ‘good old days’, when there were more small listed firms, greater demand, more new issues and robust small-cap stock performances in the UK, we should embrace the next frontier of capital markets. AIM’s demise clearly signals the market's direction – towards the rise of private markets," says the boss of a private market investing platform.