A test of maturity for the most ambitious companies: how translisting works

Thirty companies in 13 years. That is the number of firms that have made the leap from the EGM market, dedicated to small and medium-sized enterprises, to the main market, Euronext Milan. These are the companies at the forefront of ‘translisting’ (or ‘uplisting’ – the terms are synonymous), which is the stock market’s equivalent of a ‘school-leaving exam’ that enables them to move up to a higher market tier, increase their size and liquidity, and gain inclusion in indices subsequently tracked by passive investors (ETFs).

The calculation begins in 2013, when the then AIM segment (now EGM) was merged with the MAC, the Alternative Capital Market, another market for SMEs. The first company to make the leap to the main market was Sesa, on 22 October 2013, a company based in Empoli operating in the field of technological innovation and digital services. The most recent company to make the move, however, was Kruso Kapital, on 22 June this year: the company specialises in providing pawnbroking services to private individuals.

The best-known is the Lombardy-based company Technoprobe, which manufactures and markets instruments for testing microchips: it has a market capitalisation of around 20 billion euros, accounting for almost two-thirds of the 30 companies that have made the transition, and is set to join the FTSE MIB, the blue-chip index of the Milan Stock Exchange; it completed its translisting in May three years ago. Finally, it is worth noting that, over the past 13 years, seven of the companies that made the move to the main market have been delisted: Piteco, Alkemy, Sicit, Salcef, Antares Vision, Net Insurance and Digital Value; OPS eCom (formerly Giglio Group), on the other hand, has been suspended.

The bulk of the listings took place between 2018 and 2023. The last two years, however, have been rather sparse, as also noted in the latest Consob report (just one). “In my view, there will be more moves to the main market in future, driven by the European ‘Listing Act’, which provides for a simplified prospectus compared with the past,” says Barbara Lunghi, head of primary equity markets at Borsa Italiana (Euronext Group).Before this measure came into force, in fact, EGM companies had to publish a prospectus identical to that of newly listed companies in order to upgrade their listing. Now, however, there is a simplified process. Kruso Kapital, the latest EGM company to move to Euronext Milan, has already taken advantage of the new rules. And I think some companies have postponed their move whilst waiting for the ‘Listing Act’ to come into force.” He adds: “The EGM can be described as an incubator for companies that have opted for a gradual approach to listing. It is a sort of training ground, particularly for SMEs, that wish to grow. Furthermore, compared with the main market, the listing process takes less time – between 4 and 6 months.”

Small companies therefore ‘get a taste’ of trading on the EGM before taking the plunge. Growth, however, is not automatic. “The higher free float required on Euronext Milan, the broader investor base and greater visibility can encourage higher trading volumes and more efficient price discovery,” according to Integrae Sim’s equity research team. “However, this is not an automatic outcome: liquidity and the quality of trading continue to depend on the issuer’s size, investor interest, research coverage and the number of shares actually available on the market. Translisting therefore creates potentially more favourable conditions, without, however, in itself guaranteeing greater liquidity.”