Efficient capital markets - more ambition needed for EU Listing Act
One thing must be clear to all of us: An efficient capital market is an essential prerequisite for meeting future challenges such as digitization and the fight against climate change. Such a capital market enables the financing of growth, innovation and employment in the technologies of the future. If we want to continue to occupy one of the top ranks in the global economy - all of our prosperity depends on it - then we should urgently strengthen the performance of our domestic capital markets.
It is therefore thought-provoking that the number of listed companies on the Regulated Market of the Frankfurt Stock Exchange has been falling continuously since 2007. In the years 2016 to 2021, there were 64 IPOs. In an international comparison, Germany is thus far behind countries such as the USA, China and also Sweden. In addition, many German growth companies have opted for an IPO in the USA. One reason for this is the increasing bureaucracy associated with IPOs and stock market listings. A change of direction is needed here so that companies can use the stock exchange in a legally secure and simple manner. The EU Commission has recognized this connection and is trying to make it easier for growth companies in particular to access the capital market with the EU Listing Act. To this end, it is addressing three aspects in particular.
Facilitating prospectus preparation and capital raising
Firstly, prospectus law is to be reformed by making it easier to raise capital and draw up prospectuses. The EU Commission is addressing the right issues, such as facilitating follow-up issues. However, not everything that looks good at first glance stands up to closer scrutiny. For example, the idea of limiting the number of pages for different prospectus formats initially seems like a considerable simplification. The flip side, however, is that this can result in new liability risks for companies if not all relevant points can be covered in the prospectus in the required breadth. Instead of limiting the pages, the aim must therefore be to reduce the content in a way that ensures liability. In addition, the EU Commission's proposal is overall too strongly tailored to share issuers. For bond issuers, tried and tested issuance programs could even be made more difficult.
Making the Market Abuse Regulation more practical
Secondly, the EU Market Abuse Regulation is to be made more manageable, legally secure and practical. To this end, simplifications in the keeping of insider lists and in the publication of share transactions by management are intended to reduce bureaucracy. The EU Commission is making good progress here, but there is still room for improvement. Ad hoc publicity is also to be simplified by exempting intermediate steps in so-called stretched facts from publication. Here, too, the approach is right, but the concrete regulation must be developed more consistently in this direction so that a real relief occurs and new risks for issuers are not threatened.
Introduce multiple voting shares
Thirdly, the IPO should be made more palatable for owner-managed companies in particular. The founders of high-growth companies in particular are reluctant to go public due to concerns about losing decision-making authority over their life's work. This concern is to be alleviated by the introduction of multi-voting shares, which have long been available in the USA, for example. Depending on the structure of the voting rights, they would then still have the majority of voting rights for important decisions even if they own less than half of the shares. However, the Commission proposal restricts the possibility of introducing multiple voting rights to companies listed on SME growth markets. However, as many growth companies also seek a listing in other market segments, the scope must include all listed companies. If this does not happen in the EU, German legislators should introduce multiple voting shares for all listed companies when implementing the directive nationally.
The EU Listing Act has been in the legislative process since December 2022. It remains to be seen whether it will be adopted in 2023. However, member states, the EU Parliament and the EU Commission should in any case set ambitious targets so that more companies use the capital markets for financing.
Corporate governance and company law
Contact Klaus-Dieter Sohn Head of Legal Department Tel. +49 69 92915-61 sohn(at)dai.de