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A government plan to increase the pipeline of UK initial public offerings by allowing private companies to trade their shares on exchanges could encourage businesses to delist, according to a trading group hoping to benefit from the initiative.
Myles Milston, chief executive of private markets platform Globacap, is planning to set up an exchange under the new private share trading system, which was announced in the March budget. It will allow shareholders in participating companies to sell their stock on a limited number of days each year.
Globacap will aim to attract mid-sized UK companies to use the service, including some that are already listed, Milston said.
“We’re not targeting the unicorns on day one. We’re targeting more of the mid-market space — companies that are valued in the £100-200mn range,” he told the Financial Times.
“There are many that are listed on Aim that would prefer not to be,” he added, referring to the London Stock Exchange’s junior public market.
The UK is urgently trying to rejuvenate its stock markets, which are suffering from falling trading volumes, a scarcity of listings and a number of high-profile snubs, including chip designer Arm opting for New York, and groups such as betting group Flutter and building materials group CRH shifting their primary listings to the US.
Pisces, or the Private Intermittent Securities and Capital Exchange System, is one part of a set of measures designed to encourage businesses to grow and list in the UK and large investors to back them.
Regulatory and disclosure requirements would be more limited than on public markets, aiming to provide a stepping stone for businesses to eventually IPO in London.
Milston said the low trading volume of many Aim-listed companies contributed to their erratic share price movements. Communications group LoopUp and biotech business Redx Pharma are among the companies that have cited liquidity constraints as reasons for cancelling their Aim listings in recent weeks.
The scale of delistings from London’s stock markets is causing concern about their future. So far this year, 17 companies have ditched their UK listings, according to Dealogic data. Last year, 64 companies left London’s stock exchanges, up nearly 50 per cent on the year before. It comes against a backdrop of a decline in public equities markets globally.
The boss of stockbroker Peel Hunt last week sounded the alarm about London’s capital markets, saying they would end up “dead” on current trends.
Pisces exchanges will be run by commercial providers and overseen by the Financial Conduct Authority.
The London Stock Exchange Group is preparing to launch its own private share trading venue under the Pisces regime, which Milston said was likely to attract larger private companies.
“If you read between the lines, I believe the reason why LSEG is pushing so heavily on the Pisces framework is because Aim is not really working,” he said.
Charlie Walker, deputy chief executive of the London Stock Exchange, said companies need to be able to “access capital and liquidity, however best works for them”.
New venues for private companies could “bring additional choice” and would be “a complement to, not a substitute for, Aim”, he said.
The Treasury said Pisces was “being designed as a stepping stone to public markets, making it easier for companies when they’re ready to list”.
Unlike public markets, Pisces trading venues “will not facilitate new capital raising, and will . . . be limited to professional investors”, it added.
