18Dec 2016

What is waiting for you on the LON:AIM Market.

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A hatchling marine iguana stands perilously close to a hunting Galapagos racer snake

If you haven’t already seen this amazing clip from the new series of Planet Earth you should. It will give you an idea of what is waiting for you when invest in the Alternative Investment Market.

You are entering a market that is geared up statically for you to lose 90% of your investment in the first year. It’s a ruthless place, make no mistake about it. Money changes people and this is a race that only the fittest will survive.

However, its not a race to the bottom IF you protect yourself. Its about survival and learning from others mistakes – you wont get many chances to survive if you dont learn quickly. Let’s cut to the chase here because that is how they make money, it’s that simple. The cake only has so many slices and once your fellow traders have eaten their slice, you could easly be left holding the emply plate.

You will be told your investments are going to multi-bag and you will live happily ever after. It sounds cynical but with a market worth £14 billion sterling plus and governing body FCA unwilling to help, you’re truly on your own.

Ask  yourself one question before continuing, watch the video and be honest, imagine the iguana and then yourself in a simliar hostile enviroment, understand the game?

Just like the new baby hatchling you’ll face enemies from all sides. No-one is your friend and they all want to take your money off you, keep that in mind. You have calculate when to hold and stay holding or if you see trouble, know when to sell before everyone else. The last thing you need is to be left in no mans land while the wise money has left the building, the snakes will get you.

Make no mistake about it, this is a free for all with no boundary’s. You are entering the AIM wild west were the sheriff is the nomads and, get this, is paid by the very companies you’re investing in and should protect you. No conflict of interest of course as the London Stock Exchange are in the business of protecting investors. But hold on, don’t mention Chines companies, CEO’s or Directors who came, saw a good thing, list on the London market and then done a bunk will all the shareholders money.

Today we have the concept on social media of total strangers you have never meet or know giving out advice, telling you their share is the next best thing since sliced bread? Then on the flip side of the coin is other people saying sell as a placing is coming, the company is bankrupt, or the CEO cant run a business.

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We need to stop here and ask two simple questions; For these  two scenario to be truthful or partially correct, these people are breaking the law. Its called having inside information. People go to prison if convicted and the USA takes a stronger stance if they are manipulating an American company. Sad to say the FCA in the UK dont show the same appetite or enthusiasm to make changes any time soon.

Confused, you should be but here is an simple question to answer; Someone comes up to you on the street and says hand me £2,000 and i will make you a lot of money. What would be your reply?

So why would you listen to website Bloggers who are unaccountable , Facebook, WhatsApp, Twitter, bulletin boards you name it, none are FCA regulated and yet for some bizarre reason, we see this happening every week on social media and the trail of destruction it leaves behind.  For the unseasoned, social media is shark infested pond and the bodies of past investors are for all to see.

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Yes, that is how crazy the world of AIM you have landed yourself in works. Just like the iguana you are fighting for day light every day on the AIM battle field.

But wait it gets worse, the very company you have researched and TRUST with all your money turn out to be a life style venture for the CEO, Directors and they dilute all your investment to the point of it being worthless. They raise cash in discount placings, but of course you will never know when this is happening unless you are on the gravy train.

You are left with shares no-one will buy and its only a matter of time before the company de-lists and its good by to your money.

The lower the market cap of a company on the AIM listing, the easier it is for a group of organised investors to manipulate the share price. This is commonly known as ramping as most of these companies, shares they talk about will be forgotten as soon as group involved reach their sell price. You will pick up on a share being talked about and buy in to the noise without even understanding what the actual company is about.

Once again the wise money will have gone and you are left locked-in. Then you alone will have to decided to hold or sell at a loss? If you repeat this mistake you are on your way to being one of the 90% who loses all in the first year on the AIM magic roundabout

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We have a big divide between Retail and Private investors on today’s AIM and if you understand the game, you will see the how uneven the playing field is for new investors.

Retail is when an individual takes part in a placing (usually at a discount to the current SP) or IPO – listing of a new company and can be given warrants along with shares they purchase. Warrants are like free money if the SP reaches the option price to exercise. Lots of retail investors sell their shares for profit and hold on to the warrants, hence the reason they still talk about the share. They have already sold but want a second bite of the cherry.

They have access to a broker and will be notified and offered deals when companies need to raise funds(classed as inside once you know this information). But the advantage this gives the individual is that they’ll know when a placing is coming in a company.

As a private investor/share holder looking from the outside, you don’t know any of the above and will always be at the mercy of the markets.

On a closing note, Brokers are here to oil the greasy wheels of AIM and keep the money machine turning by introducing new listed companies, raising cash for their company clients and looking for investors to buy their products.

The AIM market is not hard to understand if you keep an open mind and realise it is never going to be a level playing field. Most importantly, strangers are not your friend. You will hear the terms used across social media; forward selling, flipping, bear squeeze, T10-15-20, short-long position the list is endless.

The main thing to remember, you press the buy and sell buttons, no one is putting a gun to your head. When you are winning, everything will be a bed of roses, but when you are joining the 90% gang, dont say no-one warned you.

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