Egm remains Cinderella in Europe among SME exchanges

In Europe's capital markets in the first months of 2024 there was no lively IPO activity. Euronext Growth Milan was the most active with 8 debuts compared to its European counterparts dedicated to small and medium-sized companies. But while there is no lack of liveliness in Milan, in other respects there is a significant gap both in terms of capitalisation and the number of companies and often capital raised, as revealed by the Growth Market in Continental Europe study conducted by EnVent.

The distance to London is staggering: Milan has raised €81m this year with 8 new IPOs compared to €261m in 2023 and has a market capitalisation of €8.21bn. London's Aim has 718 listed companies (-55 compared to 31 December 2023), raised 10 IPOs raising €220m compared to €57m in 2023 and has a capitalisation of €76.5bn. 2023 was a lean year for Euronext Growth Paris where 271 companies are listed (- 3 compared to 31 December 2023), no capital was raised this year compared to 67 million in 2023, but it has a capitalisation of 18.7 billion, significantly higher than in Milan. Even with Stockholm, the comparison does not reward us: there, there are 514 listed companies (-17 compared to 31 December 2023) and 26.5 billion capitalisation. The gap only narrows with Madrid and Oslo.

"Over the past year, large and small cap indices have been affected by the rapid rise in interest rates as a result of global central bank policies. Geopolitical instability has triggered a risk-averse sentiment among investors,' emphasises Franco Gaudenti, Managing Director and CEO of EnVent Group. 'Despite this, positive changes in sentiment have been observed regarding upcoming central bank policies and expectations of a slowdown in inflation. Analysts and investors are actively exploring the opportunities offered by companies listed at a discount, but possessing solid fundamentals, credible business models and growth plans, and the outlook remains attractive, as demonstrated by the positive performance recorded in recent months, which denotes confidence in the recovery of the markets'.

According to EnVent's analysis, liquidity in all analysed MTFs remained in line with previous years' volumes. The need to inject capital in order to increase its liquidity and make it more attractive to investors is emphasised in many quarters.

"In all European markets, and not only those dedicated to small stocks, indices are underperforming large caps and are "overshadowed" by mega caps: suffice it to recall that Nvidia is worth roughly the entire Russell 2000 - adds Gaudenti - in the six months from January to June 2024, there were 78 listings in the US with a collection of over 17 billion dollars, most of which were listed below the IPO price. Even Aim Uk has 'lost' 100 companies since 2020 with a reduction of about 1/5, while the Ftse 100 Uk has recorded a reduction of 1/10 over the same period" Underlying this difficulty for growth markets is often the lack of attractiveness and competition between stock markets, the presence of retail investors, and the greater impact of Central Banks' inflation-reducing policies. "Companies that go IPO," Gaudenti further details, "must have adequate valuations and pricing, a track-record of growth, and a credible and profitable business plan. In the Egm market, we have seen a reduction in multiples since 2022. This trend has made companies attractive to potential acquirers, who take advantage of this market momentum to launch public offers for companies valued at a steep discount. We see this phenomenon not only on the unregulated market, but also on Euronext Milan and on the major European stock exchanges'.