AIM shares in ISA'S, the dark side and buyer beware

It was perhaps ironic that after the announcement over the weekend that AIM shares would be allowed in tax free share ISA's from later this year, the market opened up Monday with a couple of its constituents under suspension.

Silverdell and Pursuit Dynamics had their listing suspended, the former has yet to release a statement as to why, while the latter did so yesterday. In the absence of any information there has been much speculation about what has happened to Silverdell. Time will tell, but while there may be celebration that AIM shares can finally be included in ISA's, it is important to understand that many of these companies are high risk and regulation is very light touch.

AIM is a market that has its critics, Tom Winnifrith being one of the most vocal. Here's what he has to say about the decision to allow AIM companies into ISA's.

The crap at the bottom of AIM which is loss making now and always will be cannot attract institutional funding for a good reason. The bottom 450 companies on AIM are just not investment grade material.

Most are resource stocks or investment companies or just plain joke companies. They create no real jobs in the UK and in most cases merely seem to exist to support the same band of directors (who rarely have big stakes in the firms) and to pay fat City advisors fees. They simply DO NOT create very many jobs in the UK. The firms that create most jobs are small private companies. Claims that AIM creates real jobs outside the boardroom and the Square Mile on a meaningful scale are simply false and were part of the spin that financial services companies & City financiers served up to push for this ISA change.

This change will create very few if any real new jobs. Whether it will assist Middle England is saving in a more prudent, careful and measured manner is also something about which I have grave doubts. But the jury is out on that for now.

Will a flood of ISA money revive the Cesspit? Of course not. There will not be a flood of money for the small cap end of the market. For it to recover AIM regulation needs to kick out the miscreants who lie to investors, restore trust in the market and finally to attract a few real companies that make things rather than just more and more cash shells, investment companies and third rate resource exploration plays. Will that happen? I see no signs of it.

http://www.shareprophets.com/views/892/aim-shares-in-isas-misguided-folly-driven-by-city-misinformation
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Not all AIM companies are bad and things can go wrong at any of them, but anyone buying them needs to be aware that even after you have done your due diligence you might just get a bad one and sometimes you won't know it until it happens.

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http://www.sharesoc.org/membership.html