Green shoots appear to be springing up all over the AIM and the wider small-cap market.
On Thursday, no fewer than seven companies came to the well to replenish their empty cash tanks.
Okay, the money was small beer, but it was indicative. In the first four months of 2025, the growth market – if you can still call it that – was as arid as the Gobi Desert.
There was very little in the way of replenishment for fledgling mining, biotech and tech companies, part of a funding drought that dated back three years.
The War in Ukraine, as well as pushing energy bills sky high, also scared away investors, particularly those that would tend to back smaller, riskier enterprises by putting their funds into stock placings and other equity funding mechanisms.
Why is cash important?
If you want to understand how small-caps live, grow or occasionally implode, you need to follow the money. And when money stops flowing, companies fail fast.
Small-cap companies are rarely self-sufficient (cash is the MOST important proxy for longevity).
Fuelled by the latest placing, rights issue or retail offer, these businesses are in the business of becoming something bigger, which usually means constant reinvestment (in other words, they are permanently passing around the cap, leading often to dilution and discontent).
The ideal is that the investment goes towards scaling a product, breaking into a new market, or simply keeping the lights on while chasing that elusive first profit.
But when the taps are turned off, businesses fail. And we have seen that happen recently with startling regularity.
However, we’ve also seen another trend. A mass of defections from AIM to the sanctuary of the private markets, where there are zero listing fees and costly regulation.
Last year, 89 companies quit the market, and halfway through 2025, we are approaching that figure.
AIM is now down to fewer than 700 constituents, less than half the peak number.
Cavendish, the boutique investment bank with a front-row seat to the UK’s small and mid-cap market, recently signalled a change in sentiment, with confidence beginning to build again.
According to the commentary it provided alongside full-year results last week, there are three drivers.
A weakening US dollar, rising political risk stateside, and a growing sense among global investors that being overexposed to America may be more of a bug than a feature.
As portfolios begin to rebalance, undervalued UK equities, particularly smaller ones, are starting to get a second look.
Sceptics will point out (with some validity) that the Thursday rash of equity fundraisers is no more than pent-up demand meeting a momentary window of supply. And, as we head into the summer, business lull, activity will drop off.
Let's hope that Cavendish's analysis proves correct and it is part of a broader reappraisal.
If this is the case, and the cash taps continue to flow, AIM can return to cultivating exciting growth businesses rather than watching them wilt and die.
Thursday's fundraiser
Coinsilium Group Limited (AQSE:COIN, OTCQB:CINGF) - £2.8 million
Hamak Gold Limited (LSE:HAMA) - £2.4 million
Rockfire Resources PLC (LSE:ROCK) - £2 million
Blackbird PLC (AIM:BIRD) - £2 million
Vinanz Ltd (LSE:BTC, OTCQB:VINZF)/London BTC Company - £1 million
United Oil & Gas PLC (AIM:UOG) - £800,000
Caracal Gold PLC (LSE:GCAT) - $1 million convertible loan note