‘We’ve nothing as yet,’ says Stanislas Yassukovich. ‘But we have an impressive line-up of applications for listing and a number of exciting IPOs in the pipeline.’
The chairman of Easdaq is speaking about the number of companies trading on the pan-European stock exchange two weeks after it officially opened for business. Zero is the approximate total – which seems a pretty poor result considering that Easdaq has been boasting about its vision for nigh on two years now.
Yassukovich is unfazed. Forget about popping champagne corks at the opening ceremony, this is a long-term thing and Easdaq is here to stay. He stresses that by importing the Nasdaq philosophy to Europe, the new market is not merely providing a capital raising mechanism for entrepreneurial companies but can actually accelerate the development of that sector of the economy.
‘We’re absolutely determined to concentrate on quality not quantity, ‘ he adds. ‘We’re not really fussed with how many companies we have listed at the end of this year or at the end of next year. What we’re primarily concerned with is getting the right sort of companies. Once people see the impact of an Easdaq listing, that will bring more interest – a classic example of how success breeds success.’
Fighting talk. But you wouldn’t expect anything else from Yassukovich. He’s seen it all before. The minor blip of there being no stocks available to trade on opening day is unlikely to sway him from a concept which has dominated much of his career. Yassukovich is widely credited with being one of the founders of the Eurobond market and has long talked about the need for something similar on the equity side.
And he has had the clout to make people sit up and listen, too. His past positions include being chairman of Merrill Lynch Europe, chairman of the International Securities Markets Association, and deputy chairman of the London Stock Exchange. As the biographical blurb from Easdaq says, ‘Stanislas Yassukovich has been closely associated with almost every innovation and development in the Euro-securities market.’
In fact Yassukovich’s thinking has often been considerably ahead of its time. He recalls talking to a gathering of European venture capitalists in 1979 and lamenting the absence of an exit route for their investments. At the time he confidently predicted rapid development of a Euro-equity market to follow in the footsteps of the then burgeoning cross-border debt market. ‘Maybe I was a little bit in advance,’ Yassukovich suggests. ‘But I’ve always had an ambition to be involved in the second shoe dropping: the internationalisation of the equity market.’
Some 16 years later Yassukovich felt that the time was right; so he readily accepted an invitation to join a committee to discuss the creation of a pan-European equity market. The move was partly prompted by the closure of the UK’s Unlisted Securities Market, partly by a desire to create something along the lines of Nasdaq within the European environment.
‘I was very interested,’ he says. ‘It involved many of the same challenges and difficulties as in the early days of the Eurobond market: creating a common culture among the major participants; overcoming national restrictions and barriers to cross-border activity.’ He believes that parallels can be drawn between the Europe of today and the US of the 1950s in that there is a need to ensure that small, high-growth, largely regional entrepreneurial companies have access to a broad range of potential investors.
Hang on a minute, though. Doesn’t that over-simplify the situation a little too much? The US was blessed with a common language, common securities laws and common culture. European high-growth companies just aren’t in the same boat. And to the extent that they are, it’s because they are invariably chugging their way across the Atlantic to seek a listing on Nasdaq.
Yassukovich shrugs off these difficulties, pointing out that such obstacles did not prevent the creation of a Eurobond market. Multi-cultural Europe still has venture capitalists operating across borders and the companies which are growing are those which address their products and services across the European time zones. ‘In economic and investment terms, language and cultural differences are of less and less significance,’ he says. ‘In any case, I’d be prepared to argue that, in the 1950s, the culture and almost the language of a hi-tech company in Silicon Valley was pretty different from that of a Boston-based investment manager.’
That may be so, but the US is blessed with an unrivalled culture that favours entrepreneurial risk and breeds a thirst for equities. A Eurobond market is one thing; surely developing an equity culture across the continent is quite another?
Yassukovich is convinced the time is right. And he is convincing with his answers, too. Six arguments for the timely launch of Easdaq are swiftly proferred; and if they are rehearsed you certainly wouldn’t know it. They are as follows.
- European governments are being forced to alter their fiscal habits and industry’s need for debt is declining; therefore more savings will be allocated to equity.
- Europe’s demography means there is a huge and growing retirement obligation which will have to be funded.
- A new generation of entrepreneurs are not as prepared as their forebears to have their hands tied by banking finance.
- European venture capitalists need an exit route for an increasing number of companies in their portfolios.
- The European Union has helped break down barriers between markets with a series of harmonising directives.
- US investment banks with specialised experience in the high-tech, high-growth sector, such as Alex Brown and Robertson Stephens, are seizing upon Europe for their future growth potential.
There’s no chink in Yassukovich’s armour regarding the recent appearance of nationally-based second markets such as Aim or France’s Le Nouveau Marche, either. At the UK’s suggestion that Easdaq is arriving a little late on the scene, he responds: ‘No, no, no. We don’t see them as competitors – we see them as entirely complementary.’ National small company markets are potentially beneficial to Easdaq, he explains, since they act as a breeding ground for companies which are not yet interested in taking a pan-European approach. ‘They are largely for young, entrepreneurial companies whose horizons, both commercially and in investment terms, are national and local,’ Yassukovich points out. ‘But those markets will help the smaller companies grow to reach the point where they can consider an Easdaq listing.’
Here Yassukovich takes the opportunity to return to his earlier remark on quality rather than quantity. Whether he is taking a dig at the ‘competition’ or not remains a moot point, but he notes that he and his colleagues have watched with interest the ‘difficulties’ Le Nouveau Marche has experienced in its attempts to rapidly list a quantity of companies. ‘The result is not very satisfactory,’ he remarks. ‘In what has been a bull market, most of Le Nouveau Marche’s new listings are selling at discounts to issue price. In this market environment that’s pretty surprising and I think it is due to a policy which is insufficiently selective.’
Indeed, Yassukovich stresses the importance of selecting quality throughout the interview. From a European standpoint, Easdaq’s listing requirements are fairly stringent. They include accounts in accordance with either IAS or US Gaap (if a future US offering is envisaged); quarterly reporting; and the establishment of both audit and remuneration committees, to name just a few. But won’t that put off some companies from considering a listing?
‘Companies are going to be driven to Easdaq through fundamental self-interest,’ says Yassukovich. ‘They will have significant capital requirements built into their five year business plans and will do whatever is necessary to ensure access to that capital. That includes introducing what you might call fashionable corporate governance requirements and adopting a much higher degree of disclosure and transparency than they have been accustomed to in the past. Again, I think there’s a generation of entrepreneurs who understand that. They realise that the days are gone when you could build a business without having to suffer any of these inconveniences.’
And Yassukovich is adamant that those requirements will not be relaxed in order to attract companies into the fold if fewer than expected want to join the pan-European market. He reaffirms that it is a comfortably funded, long-term project with shareholders all in for the long pull.
‘Easdaq will serve as both a bridge to Nasdaq and an alternative market within the European time zone,’ concludes Yassukovich. ‘It is inconceivable that this whole sector of European economic activity be forced to rely solely on Nasdaq for its capital needs. That would be a sign of considerable weakness as far as European economic structures are concerned. And I think that’s one reason why the European Commission and Parliament have expressed so positive an interest in this project.’
Whether companies and investors will follow suit remains to be seen.
