In the olden days, it used to be simple. You either listed your shares on the local stock market or you remained privately-owned. End of story. If you met the requirements of your domestic exchange and you wanted in, that was pretty much it. These days, if you are a European company hoping to list, prepare to be smacked in the face by a dollop of existential angst – because now there’s a veritable market of markets vying for your custom and you actually have to choose where to list.
Some observers consider that Europe’s high-growth marketplace is in real danger of over-crowding. But new markets keep on springing up and, like a gaggle of taxi drivers outside a North African airport, they are not shy of informing potential customers of their own unique appeal.
Just take a look at the contenders. There’s Easdaq, a pan-European exchange that describes itself simply as ‘The European stock market’. Alongside that, there’s London’s Alternative Investment Market (Aim), which spokesman Andy Muncer proudly describes as ‘the most successful growth exchange in Europe last year – in terms of market performance’.
Nouveau, Neuer, Nuovo
Also in the ring is the Euro.NM alliance (comprising five secondary markets including the Paris Bourse’s Le Nouveau March, the Deutsche Borse’s Neuer Markt and the Italian Stock Exchange’s Nuovo Mercato). Euro.NM boldly describes itself as ‘the market leader for high-growth stocks within the European time-zone’ – although the grouping still derives over 90 percent of its capitalization from the Neuer Markt and the Nouveau March.
Several other exchanges have also established their own high-growth markets. And later this year, Europe is going to hear the pitter-patter of yet more infant exchanges. In fact, come this fall, IPO-eyeing IROs and their corporate colleagues will be presented with a veritable smorgasbord of choice, or a headache-inducing conundrum, depending on your point of view.
Newex – ‘The quality market for Central and Eastern Europe’ – is set to be launched by the Vienna and Frankfurt exchanges this year, with the aim of supplying a ‘significant, liquid and transparent market’ for the region. And Morgan Stanley has teamed up with OM Gruppen to create a new internet-based exchange called Jiway – the Chinese word for wisdom – which is set to be launched in September with a leaning toward retail investors.
However, for the current clutch of exchanges, the most ominous addition to the scene looks set to be Nasdaq-Europe. The venture is targeted to open in the fourth quarter of 2000.
You can say what you like about these exchanges, but you cannot claim they don’t know how to market themselves. IPOs and dual listings are on the increase across the board which must, at least in part, be attributable to the persuasive campaigning of the key exchanges. Still, it’s all very well talking the talk. But what do the companies themselves think of the exchanges?
Two take AIM
Access Plus, a print and marketing services company from Bristol, England, is one of Aim’s success stories. And Peter Houston, the company’s finance director, doesn’t mind saying so. Houston explains that the company’s flotation came about as a result of former investors severing their involvement. ‘The main reason,’ he says, ‘was that venture capital investors wanted a way out.’ Having been shunted onto a public stock market, life has taken an upward turn. ‘Our value has risen to around £67 mn,’ boasts Houston. ‘That has exceeded our expectations.’
Andy King, director and company secretary of Minorplanet Systems, a vehicle tracking systems developer from Leeds, England, is equally happy with his company’s progress. ‘We listed on Aim for cash and credibility,’ he remarks. ‘We were spending a lot on sales and R&D and our pockets are only so deep. We needed equity investment because it was high risk.’
Houston feels that the Aim listing has given rise to auxiliary benefits for Access Plus, too. ‘When we made an acquisition, I think it helped that we were a quoted company,’ he says. ‘It gave us credibility.’
His words are echoed by Minorplanet Systems’ Andy King. ‘We felt that the listing added credibility,’ he says. ‘It shows you’ve gone through the scrutiny and the due diligence.’
Liquidity lack
But conduct a wider survey and you’ll find that sentiment toward the market hardens. London-based accountants Mazars Neville Russell did just that and the responses to the firm’s 1999 Aim survey makes for sobering reading. Nearly nine out of ten Aim companies feel that the market lacks liquidity.
It doesn’t worry everyone though. ‘We haven’t found it to be a massive problem,’ says King, ‘but then people aren’t wanting to sell our shares. If people did liquidate a big block of shares, that might cause a problem but it’s been okay so far. And when we did a placing of our shares, we were ten times over subscribed.’
Access Plus, likewise, hasn’t found itself hampered by illiquidity. In any case, ‘Our business is very cash-generative,’ says Houston. ‘So we don’t really need to go the market to raise cash.’ What its shareholders feel about any difficulty they might have realizing their investment may be a different matter, of course.
But that begs the question of why they invested in Aim companies if liquidity was important to them. More to the point, from the corporate perspective, what was it about Aim that made these two companies choose it for their stock market debuts?
It seems that with many companies of this size, the choice is pretty well automatic. Muncer points out that that Aim differs from other European exchanges. ‘Aim is slightly different to Euro.NM, for example,’ he argues. ‘A lot of our companies have capitalizations of just a couple of million pounds. Euro.NM companies are £120 mn plus so they’re very different markets.’
So companies’ hands are tied? Quite possibly. According to the Mazars Neville Russell survey, 97 percent of companies feel that Aim lacks sufficient exposure to overseas capital; while 87 percent say Aim would benefit from integration with another European market.
But few domestic small caps consider a foreign listing in practice. ‘We didn’t particularly consider Easdaq,’ says Houston. ‘In 1998 sentiment for small caps was pretty low and there was a general lack of enthusiasm. Since then we’ve taken the view that unless you have a substantial market cap or you’re a growth stock, it’s not worthwhile. We’ve had about 15 percent compound growth – sure but steady.’
Minorplanet, likewise, hasn’t looked abroad. ‘We’ve had plenty of interest in the UK,’ explains King, which has obviated the need to venture abroad in search of shareholders.
Aim companies basically fall into two categories: those tiny-cap companies that just want to be listed; and growing companies that look upon Aim as a market in which they can mature before moving up to a main market. Minorplanet belongs in the second group. ‘We’re looking to a full listing,’ says King, ‘so we’ve tried to set ourselves up as a fully listed company anyway. Our time on Aim is a sort of grooming period.’
Small choice
Bluegate, a Brussels-based producer of oil and gas transport optimization software, is listed on Euro.NM Belgium. Why was that its choice?
‘There are few possible markets for very small companies hoping to raise funds, which is what we were around 18 months ago,’ says CEO Patrick Sochnikoff. ‘So we basically had a choice between Euro.NM and Easdaq. Our broker advised us to go to Euro.NM because he was used to it and it suited our size.’
Sochnikoff takes a balanced view of the market. ‘The good point about Euro.NM is that it’s one of the few markets able to accept small, growing companies in Europe,’ he says. ‘Its main weakness is trading volumes. And there are very few means of changing that situation, apart from communicating with investors.’
That deficiency, as Sochnikoff points out, is probably the result of – or a natural bedfellow of – another problem ‘The other main weakness is the lack of visibility, he says. But that’s almost bound to be a problem with small-cap markets, by the very nature of their constituents. But it doesn’t seem to be making much impression on Sochnikoff’s optimism. ‘I’m very positive that Euro.NM is good for young, dynamic companies,’ he maintains. ‘My hope is that more companies will be quoted.’
Easdaq does it
Antisoma is a London-based biopharmaceutical company that listed on Easdaq at the end of 1998. ‘We listed because we wanted to raise capital,’ explains its investor relations officer Valerie Tate. ‘We’re a biotech company and in common with most biotech companies, we’re not making money from sales.’
Easdaq has had some bad press as companies have trickled, rather than flooded, onto the market. Trading volumes haven’t gone interstellar, either. But, for all the criticism leveled at it, some companies aboard the good ship Easdaq do seem relatively content at its – and their own – progress.
‘It was mid-summer of 1998,’ recalls Tate. ‘We recognized the need for more funding. But it wasn’t a very good time for London. I think only two companies got away that year and people were saying that the market was closed. We felt that we had a good story to tell, however, so we went for Easdaq. And it has been very successful.’
Indeed, Tate reports that Antisoma is ‘very pleased with our performance in the after-market. We had a very stable share price for the first six months.’
Like Aim, liquidity has been the scourge of the market but, again, it’s not a gripe for all companies. ‘Liquidity hasn’t really been a problem for us,’ says Tate, ‘because we attracted the shareholders we were looking for. We attracted a number of good institutional placements. We’re not actively seeking retail investors, because biotech stocks have a big risk element, so it’s not really a widows and orphans stock. But there’s not much trading going on,’ she concedes.
While Antisoma seems broadly content with its experience on Easdaq to date, the company has recently transferred much of its attention elsewhere. ‘We dual-listed in London in December, on the main market for which we qualify comfortably,’ says Tate. ‘But it wasn’t as if we were stamping our feet saying Easdaq is no good. It’s just that London is our home market and we wanted to access UK shareholders. We’re two-thirds London, one-third Easdaq.’
And the consequence? ‘Volume has improved since we dual-listed,’ says Tate. That’s not surprising, but Tate makes it clear that Antisoma is still a satisfied customer of its first stock market. ‘During the IPO, Easdaq was extremely helpful,’ she points out. ‘We built up a good relationship which we still have today.’ She says it’s definitely harder in London. ‘Easdaq is a lot more accessible; they are very responsive although they’re not that proactive.’
If AIM is a trampoline up to London’s main market, where can you go from there? ‘We’re looking at a US listing,’ says Tate. But she’s well aware of the demands that might entail. ‘Satisfying investors across the Atlantic is difficult,’ she says. ‘They demand a lot of visibility.’
But the current listing is still a step in the right direction. ‘Easdaq – intentionally or not – modeled itself on Nasdaq,’ remarks Tate. ‘So we’re into the swing of quarterly reporting now and a transition to Nasdaq wouldn’t be that hard.’
So being Nasdaq-friendly, would Antisoma have acted any differently if Nasdaq-Europe had already been up and running? ‘It’s a good question,’ dissembles Tate. ‘And it’s one that I’d really prefer not to answer to tell the truth.’
