Frankfurt, Zurich Financial managers across Europe are racking their brains about how to encourage more companies to go public. Jos Dijsselhof from the Swiss stock exchange Six has therefore introduced the Sparks segment, in which the hurdles for an IPO are significantly lower than at other trading venues.
In this way, the Six boss not only wants to attract Swiss companies, but also medium-sized and growth companies from Germany. “We also want to address companies from Germany and other European and non-European countries with our offer,” announced Dijsselhof in an interview with the Handelsblatt.
“IPOs in Switzerland are particularly attractive in segments such as pharmaceuticals, biotech and banking, as there are already several strong listed Swiss companies there,” says the Dutchman. Finally, investors preferred it when several companies from one industry were represented on a stock exchange that could be compared.
So far, no German company has been listed on the Swiss stock exchange. From Dijsselhof’s point of view, however, this should not remain the case – and he also has start-ups in the finance and insurance sectors in mind. “I see good prospects for Zurich to develop into the preferred stock exchange for European fintechs and insurtechs.”
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Companies that are listed in the Spark segment do not need a comprehensive annual report for this. Alternatively, they can fill out a 29-page questionnaire on the subject of corporate governance, which is available on the Six website.
In addition, the stock exchange operator helps prepare analyst reports about the companies, which is important for investors. And he prepares managers in workshops for what to expect during and after an IPO.
The fear of the medium-sized company before the stock exchange
With Scale, Deutsche Börse launched a segment for medium-sized and growth companies in 2017. At that time, it replaced the Entry Standard, which did not enjoy a good reputation among many investors. Some of the admission criteria for Scale are similar to Sparks, but there are also differences.
Within Deutsche Boerse, some can imagine a further lowering of the requirements for IPOs in Frankfurt. “More tailored transparency requirements should apply to young companies that are just going public than to established companies that have been active on the capital market for some time,” said board member Thomas Book at the end of 2021 in an interview with the Handelsblatt.
Deutsche Boerse and the Six both complain that promising companies from Germany and Switzerland sometimes prefer to go public in the US because they can achieve higher valuations there.
In addition, both know that it is not easy to convince conservative medium-sized companies to go public. These companies are often secretive and fear that after an initial public offering (IPO) they will suddenly have to report on many things.
“We want to take away this fear by making it clear to them what has to be disclosed in a stock exchange listing and what doesn’t,” says Dijsselhof. “I am aware that we need staying power to do this.”
The Madrid Stock Exchange (BME), which has been part of Six since 2020, introduced a growth segment back in 2009. “It took a long time for companies to gain confidence there, but things are going really well now,” reports Dijsselhof. In the past year alone, there were 16 IPOs in the BME growth segment.
Interested in major acquisition in Asia
The EUR 2.6 billion purchase of the Madrid Stock Exchange was of great strategic importance for the Swiss Stock Exchange. The EU decided in 2019 to no longer recognize the trading standards in Switzerland as equivalent. Since then, among other things, no shares from EU countries can be traded on the Six.
According to Dijsselhof, however, this has little impact on the Six. Trading in EU shares was a “negligibly small part” of the business. Thanks to the acquisition in Spain, there are no longer any restrictions on the strategic options either. “If there should be any business in the future that we can’t offer in Switzerland due to EU regulations, then we’ll do it in Madrid.”
With its mainstay in Switzerland and Spain, Dijsselhof now sees the group as well positioned. “Acquisitions of other European stock exchange operators are currently not on the agenda.”
Outside of Europe, however, the CEO is open to large acquisitions. “It would be interesting for us to take over an exchange in another region of the world that is roughly the size of ours and through which we would open up an additional market,” he says. “I could imagine Asia, for example, where many of our customers are increasingly active.”
The Six also wants to grow in the crypto business – both by developing its own solutions and through acquisitions. “I would like to offer a good custody solution where investors can be sure that their assets are protected,” says Dijsselhof.
Six boss doesn’t believe in cryptocurrencies
On the other hand, entering the trading of cryptocurrencies is currently not on the agenda because platforms such as Coinbase have already established themselves in this area. For the Six, Dijsselhof therefore sees “more opportunities in other digital assets” in retail.
Personally, the Six boss is critical of cryptocurrencies. He thinks that investments should be backed by a clear economic value. “If this economic value is not clearly defined, it is only a matter of supply and demand.” For many of the major cryptocurrencies, the supply is only limited by computing power. “That would worry me as an investor,” says Dijsselhof.
However, that is only his personal opinion, the other is customer demand, emphasizes the Six boss. “The crypto industry has grown so much that it is very difficult to ignore it.” Many Swiss banks that own the Six have now shed their initial reluctance and are now offering their customers crypto investments.
According to Dijsselhof, numerous professional investors remain cautious. “Of course, many crypto exchanges, which are often not real exchanges at all but just brokers, claim that they have many institutional investors,” says the Six boss. “But the real institutional investors that we speak to would never invest their money in such venues.”
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