Home' Trinidad and Tobago Guardian : October 31st 2013 Contents OCTOBER 2013• WEEK FIVE www.guardian.co.tt BUSINESS GUARDIAN
THE ECONOMIST | BG27
Ten-year-old Ekinops, a small French
company that facilitates data trans-
mission over high-speed fiber-optic
cable, went public in April, raising
US$8.7 million on NYSE Euronext in
The fast-growing firm wanted money to help it
expand, and its venture-capital backers wanted to
start returning money to their investors. Didier Bredy,
Ekinops boss, says that he is "delighted" with the
amount raised in exchange for more than a fifth of
the firm s equity and with subsequent trading volumes
in the company s stock, the price of which has risen
by a third.
Ekinops is in a tiny minority of small firms in
France that turn to the capital markets for cash, how-
ever. Chloe Magnier of the Observatoire des Entre-
preneurs, a the research arm of the pressure group
PME-Finance, thinks that small businesses cover
only around two per cent of their external financing
needs that way, while banks supply 90 per cent.
Elsewhere in Europe the picture is similar.
Various stock exchanges are now hoping to change
In April 2012 the Borsa Italiana, part of the London
Stock Exchange Group, set up the Elite programme
to work with growing, export-oriented small firms.
The goal is to improve skills, connect like-minded
businesses and introduce them to potential backers
such as private-equity funds. The program will be
a success if the number of firms signed up, 131 so
far, reaches 500 or so, Borsa chief executive Raffaele
Jerusalmi says, and if quite a few of them raise growth
capital through an initial public offering or other
sources introduced to them by Elite.
In March the LSE introduced a new High Growth
segment of its main market, in addition to its existing
Alternative Investment Market for small firms, relaxing
the listing requirements for fast-growing, mainly
high-tech businesses. In May NYSE Euronext, which
groups the stock exchanges of Ams-
terdam, Brussels, Lisbon and Paris,
launched Enternext, a marketing ini-
tiative to raise the profile of the mid-
cap and small-cap segments of the
main market, on which Ekinops listed,
along with Alternext, the traditional
market for smaller firms.
Enternext supports the 750 small and
medium-sized companies already listed
there and seeks to attract new ones.
Perhaps coincidentally, the number of
new issuers in the first seven months
of 2013 was almost as high as in all of
2012. Various proposals for "growth"
markets with special rules, or even a
pan-European small-business stock
market, are also much discussed in
Second markets with easier listing
requirements for small and middling
firms have a checkered history.
Exchanges in Europe s four biggest
economies have set up less than a dozen
since 1995, of which half now exist.
They tend to flourish in heady times
but shrivel in less favourable ones, partly
because that is what happens to small
firms themselves but also because lim-
ited transparency and sketchy coverage
by analysts make such markets less liq-
uid. Even AIM, the biggest, has strug-
This time, though, there may be a
closer convergence of interests. Bank
lending to small companies has kept
falling since the crisis, despite official
urging, and interest rates for small-
business loans are persistently higher
than for big ones.
Governments desperate to encourage
growth are focusing on small firms and
are enacting measures to make their
securities more attractive to investors.
Since August 5 savers in Britain have
been able to hold shares purchased on
AIM and similar small-firm markets
in tax-free savings accounts. France
has announced something similar, and
also will make it easier for insurance
companies to invest in small firms.
Investors starved of yield from tra-
ditional sources are increasingly inter-
ested in small-business securities.
Among them, Enternext and Deutsche
Borse say, are some that have not in
the past been especially active in the
sector, such as "family offices," the
investment arms of those with inherited
wealth. In Germany there is a lively
interest in small-company bonds.
Stock exchanges are courting small
firms with a view to rebuilding new
listings, which have suffered since the
onset of the crisis. It isn t easy, though.
"It takes a long time to build a suc-
cessful growth market," says Alastair
Walmsley, head of primary markets at
AIM has been at it for 18 years. The
success of newer ones will depend on
the quality of company information
and the ease with which investors can
sell as well as buy.
In the meantime other approaches
are gaining ground. Small firms are
beginning to find modest amounts of
capital through crowdfunding platforms.
Banks are being encouraged to maintain
their capacity for new lending by secu-
ritising their small-business loans, tak-
ing risk off their books that new bank-
capital rules are making costlier.
It is all part of the gradual shift of
continental European companies of all
sizes from banks toward market-based
finance. Bredy simply caught the wave.
@2013 Economist Newspaper Ltd. (Dis-
tributed by the New York Times Syndi-
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