Due to febrile speculation about the future of business relief for AIM-listed shares in ahead of next week’s Autumn Budget, a number of companies on London's junior market have seen their valuations "decoupled" from the large, mid and small cap UK indices.
This is the observation from broker Panmure Liberum's head of research Simon French, who highlighted some of the affected stocks, including vets chain CVS Group (AIM:CVSG) PLC, Next 15 Group PLC (AIM:NFG) and house stocks like Revolution Beauty Group PLC (AIM:REVB) and Artisanal Spirits Company PLC (AIM:ART).
This speculation is based on revenue-raising suggestions from external think tanks and has not been the result of statements from government policymakers, French noted.
While no government ministers have confirmed an official stance on this policy issue, inheritance tax is known to be one of those areas being considered as part of a holistic tax review ahead of the Budget, he added.
Thus a note was issued to clients to "identify ways for investors to approach what is already systemic weakness across AIM - ahead of what may be a significant existential event", with analysts putting forward their AIM-listed and 'buy'-rated stocks.
French said the IHT relief applied to most AIM shares held for more than two years "is an important aspect of the UK growth capital ecosystem" and has "become more important since the Brexit vote" along with a long-time pivot by investors away from UK equity ownership.
Removal of IHT relief will, in French's view, "put further pressure on the cost of capital for UK-listed firms and undermine the government’s primary mission for faster economic growth".
French noted that a higher proportion of AIM 100 share prices (62%) are down since the general election compared to the FTSE 100 (39%), FTSE 250 (48%), and Small Cap (52%) indices, with the average AIM share price down 5.2% since 4 July, with the average FTSE Small Cap and 250 share price flat over the same period, whilst the average FTSE 100 share price is up 3.9%.