City of London Corporation and TheCityUK report highlights success of the Warsaw junior market
An interesting report by the University of Strathclyde for the City of London Corporation and TheCityUK published this month looks at trends in initial public offerings by small and medium-sized enterprises in the EU, and compares the European experience to SME IPOs in the United States and greater China. The report can be read here. Key conclusions include:
- The United States appears to have a problem: The population of publicly-listed companies has been in decline since the late 1990s and its current level of IPOs is below replacement rate.
- The small number of IPOs in the EU is lower than at corresponding points in previous cycles: This is either a severe cyclical effect due to the financial crisis, or a structural change – it is too early to tell.
- One consistent change is that there have been fewer venture capital-backed IPOs in Europe and the US during the 2000s, and this is due partly to a structural factor: Technology companies are able to start and grow with much less capital than in the past, meaning less demand for the type of larger capital raisings facilitated by the public equity markets.
A surprising aspect of the report is that since 2008 the Warsaw Stock Exchange has become a major market for European IPOs, with its Main Market and New Connect markets accounting for 30% of all IPOs is 2008, 2009 and 2010 in the EU. The Warsaw New Connect market is, like AIM, an exchange-regulated market and is now (after AIM) the second largest exchange-regulated market in Europe.
Unlike AIM, however, the New Connect market has taken various initiatives to improve liquidity (low liquidity being a major problem on junior markets), including a liquidity support programme, a cost reduction programme and the encouragement of cross-listings.
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