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How do super-rich sports-stars and musicians invest their money? Mention a few names like Paul McCartney, Mick Jagger, Tiger Woods and the racing-driver Lewis Hamilton and we instantly think of exotic tax havens, discreet offshore funds and expanding property portfolios.

However, there is another way the rich and famous might exploit their considerable earning power. They could list themselves on AIM, the world’s leading market for smaller and growing companies and the junior partner of the London Stock Exchange's (LSE) Main Market, which is generally associated with heavy-duty companies and the bowler-hat brigade.

Relatively high-risk

Launched in 1995, AIM gives individuals and companies access to global funds and in many cases greater public exposure than they would normally get. If, say, Lewis Hamilton wanted to get a listing, he would need to incorporate a company such as ‘Lewis Hamilton plc’. He would form a board of directors, probably including himself, and then seek outside investors either before or as part of the listing process.

But the very nature of Hamilton’s job as a racing driver makes him a relatively high-risk AIM listing. Although he might make a lot of money in the future and become sport's first dollar billionaire, it is always possible that be might have a serious crash at any time and his earnings would suddenly plummet.

He would have sponsorship money coming in for a while but that would soon fizzle out too. Jonny Wilkinson barely kicked a ball for several years after the 2003 Rugby World Cup and this has inevitably affected his income.

The injury-factor applies to most sports stars, like footballers, golfers and boxers. Their career spans and therefore earning power are limited and can be cut even shorter by injuries or accidents. No self-respecting AIM investor is going to back a Premier League football star with a recurrent injury problem.

Bowie Bonds

Pop stars are a different matter altogether, however. Although some pop stars and musicians go through volatile periods, they tend to have longer and more reliable cash flows than sportsmen and women.

They also have regular royalties coming in from their recordings which sports stars do not have. A pop star needing a quick injection of cash could follow the example of David Bowie. The Ziggy Stardust superstar raised £27 million via the issue of 10-year asset-backed bonds known as Bowie Bonds, the assets being the future royalties of his CDs and albums.

So how much does it cost to list a company on AIM? A listing is likely to be in the region of £200,000-£400,000, which includes the fees for a nominated adviser (known as a "nomad") and broker - normally a corporate finance house or boutique investment bank - to advise on the listing process and to seek investors. It also covers the cost of hiring a law firm to help you with the legal work and accountants to review the financial status of the company.

An AIM listing usually takes three to four months and, unlike the Main Market of the LSE which needs three years of audited financial information, is open to new and emerging businesses and individuals.

Admission document

The ongoing regulatory requirements are also significantly less than for a company listed on the Main Market. The AIM company has to produce an admission document and this is prepared by the nomad, the lawyers and accountants, while companies listing on the LSE Main Market need an official prospectus that must be approved by the Financial Services Authority and is likely to be somewhat thicker.

Potential AIMers can choose who they target as investors. They can opt for an institutional listing, in which institutional investors, such as pension funds and insurance companies, become shareholders, or a retail listing in which private individuals buy shares. If they want to raise money via the listing they are likely to produce a pathfinder admission document followed by a “roadshow” - a series of meetings with institutional brokers - to gauge interest in the company. This usually takes three to four weeks.

Listing on AIM could enable a top sportsman to bank a lot of money up-front and in advance of his or her estimated earnings and royalties. But investors are taking quite a gamble on the future exploits of their icons. They should think carefully before mixing business with pleasure.

Ben Mercer is a senior corporate finance associate at International law firm Stephenson Harwood. Last year, Stephenson Harwood brought more companies to AIM than any other law firm.

Related links

• Alternative Investment Market (AIM)
• Stephenson Harwood