The European Union (EU) is pursuing a policy to improve the environment for listings on the various European stock exchanges.
According to a statement issued today, the European Council and Parliament have now reached a consensus on a “provisional agreement” for a package that will make it easier for companies to trade shares on an exchange. This also holds for smaller firms, which frequently cannot afford the cost of compliance to become publicly traded firms.
The EU said the agreement balances between ongoing disclosure requirements and “market integrity and efficiency.”
The agreement is said to mitigate investment research rules by enabling issuer-sponsored research that adheres to a “code of conduct.”
The provisional agreement is expected to be finalized and presented to member states’ representatives and the European Parliament for approval.
Vincent Van Peteghem, Minister of Finance of Belgium, said the agreement will reduce the administrative burden for companies while making the EU more attractive for these firms to list shares.
” It is important that we continue to encourage companies to list on the stock exchange while at the same time ensuring high levels of investor protection and market integrity throughout Union,” said Van Peteghem.
Improving the ecosystem so that companies can trade on an exchange is part of a multi-year effort by the EU.
Euronews wrote last November that some companies were selecting the US over European exchanges, explaining the “main allure of US exchanges is higher valuations, as well as much larger markets to tap into.”
At the same time in the US, access to private capital for private firms is far easier for innovative young firms. In the US – there is an ocean of risk capital. Many European early-stage companies have received funding from US VCs or US private equity firms – which may influence decisions to trade on US exchanges. This is combined with a culture in the US that encourages risk and many smaller investors own shares in public firms. According to one survey, over 60% of Americans own shares. Euronerd reports that “on average, a European household holds 33% of its total financial assets in stocks and investment funds.”
Perhaps the EU should consider policies to entice investors to participate in equity markets as well.