Neither strong interest rate increases nor regulatory changes to facilitate market entry have pushed companies to take the step of starting to trade on the permanent market of the Spanish Stock Exchange. The last IPO took place in July 2022 and the market expects this trend to reverse in 2024. Sounds loud from companies like jumping drums on the trading floor Puig, I tend toVolotea, Astara, Cosentino or Europastry, but the truth is that the first three months of the year ended with no group yet daring to take the step. Rodrigo Buenaventura, head of the National Securities Market Commission (CNMV), said he was concerned about the lack of stock market debuts in early March. “Some Catalan and Spanish companies seem to want to take steps, it would be great if it happens in the short term, but we should not count on the spring to be certain. We need to work in the medium and long term, he said during his participation in the ‘Finance Summit Day’ in Barcelona.
All experts consulted by ‘Assets’ emphasize that the process of going public is complex, requires numerous regulations and requires all accounts to be displayed transparently to investors. “Many business owners With the enormous amount of information required, they become reluctant to have to ‘rip off’ their companies in front of the marketsJavier Méndez, secretary general of the Spanish Institute of Analysts, explains: “We are in a very complex geopolitical situation and the future is very uncertain. It seems that 2024 will be the year when the ‘stock market drought’ ends, but the war and uncertainty in Ukraine predominate,” summarizes the Instituto de Empresa Finance Sector Director Manuel Romero. Thereupon, the Ibercaja organization postponed its entry into the commercial arena several times.
Despite these difficulties, market operator Bolsas y Mercados Españoles (BME) in Spain He states that going public is a showcase for attracting talent and professionalizing the company’s corporate management.. Alejandro Fernández de Araoz, a lawyer specializing in business consultancy at Araoz & Rueda, points out that reaching a broader investor base allows companies to grow further and create jobs.
Interest rates are currently at their highest level in two decades; But we must not forget that the price of money will be almost zero by 2022. Many companies have not seen the need to seek financing through private equity and have turned to banking or private equity to finance themselves.. BME sources say, “There was no need to diversify financing sources for a long time,” pointing out that the lack of public offerings is a global trend. “This has occurred not only at the European level, but also in the United States, China and Japan, and publications in the field have slowed down,” they explain.
The instability of recent years has not helped companies feel brave enough to take the step of going public.. “The pandemic has affected the plans of some companies. The company needs to transform to be managed by a university body, a process that can take a year,” explains Pablo García, professor of Finance at CUNEF University. This expert points out that geopolitical uncertainty and low growth expectations negatively affect companies’ intentions to enter the market. “No matter what, there are a few that are about to emerge,” he says.
ECB’s sharp increase in interest rates is an opportunity to push companies to go public. “The rise in interest rates and the resulting increase in financing led many companies to look at the market as an alternative source of financing. Last September was a good year for stock market openings in the United States,” the professor said. Finance Pablo García. “The war in Ukraine and Israel and the political problems in Spain, added to global problems, make companies very cautious when entering the market,” says García.
The importance of monetary policy
However, in the case of Spain, the effects of the interest rate increase have not yet been felt in the stock market. “With higher interest rates, investors are becoming more demanding and It requires companies to have high future growth expectations, based on fundamentals supported by historical evolution.“says Rosa María Orozco, partner responsible for EY Spain’s Capital Markerts region. A higher currency price also means that the company’s valuation will be lower when it comes to selling market share. “The companies they are considering leaving the public now know that their profits will be discounted at a higher rate. So, this is probably the worst time to ‘monetize’ your company,” explains Javier Méndez of the Spanish Analysts Institute.
Benito Berceruelo, president of the Spanish Investors’ Day forum, pointed out that the drought in stock market debuts in recent years may have scared some companies from going public due to the increase in financing costs. At the last monetary policy meeting of the European Central Bank, the possibility of an interest rate cut in March was eliminated. Although the market believes that they will arrive in June this year.
“Given the moderate course of inflation and possible interest rate cuts in 2024, the macroeconomic situation will help increase investors’ appetite for IPOs.” Unless uncertainties regarding geopolitical instability worsen significantly in the coming months“says Rosa María Orozco from EY Spain.
lack of competition
More and more companies from the Old Continent are choosing to go to the United Kingdom or the United States to list on the stock market.. This is something Brussels knows very well because it fears that European markets will be less competitive than Anglo-Saxon markets. CNMV president Rodrigo Buenaventura focused on the need for capital markets to be a source of financing for European companies, complementing bank financing. Last November, the council of ministers gave the green light to four decrees to complete the reform in order to increase the competitiveness of the securities market. The texts are transpositions of various community directives.
Related news
In order to make the European capital market more attractive, Brussels is working on a legislative initiative known as a ‘listing law’ that would reduce the minimum share capital that companies must negotiate to run public operations for the sale of shares from 25 percent to 10 percent.. The final green light is expected to be given before the European elections next year. “This proposal is based on the fact that the listing process is cumbersome and expensive for companies in the European Union, especially small and medium-sized enterprises (SMEs). The aim is to simplify listing requirements, even backwards, making public capital markets more efficient for EU companies.” entry into the stock market in order to make it attractive and facilitate SMEs’ access to capital,” explains lawyer Alejandro Fernández de Araoz from Araoz & Rueda.
The European Commission is also working on the Debra directive, which aims to equalize the tax deductible on bank financing with capital gains. The European Commission considers that some countries in the euro zone still maintain a fiscal bias between both forms of financing by not equalizing the deductions made by companies. You can access it by choosing one option or the other and therefore you want to eliminate the differences through this guideline.