Europe should boost its IPO market to provide its best tech companies with a favourable environment to go public at home, rather than in the US, a group of European stock exchanges and startup associations have said in an open letter to European finance ministers and the European Commission.
Some of Europe’s leading stock exchanges, including the German Deutsche Börse and the pan-European Euronext, together with associations like France Digital, Germany’s Startup Verband and the European Startup Network (ESN), have called for strengthening the EU’s capital market union and introducing policy measures that would make public listing and investing in Europe less burdensome.
The capital markets union
As the European Commission’s new term is approaching, its president Ursula von der Leyen has stressed that one of her priorities for the next five years is to mobilise more private capital to finance innovative European companies. But the EU has been trying to finalise a raft of policy measures to boost investments, dubbed the capital markets union, for years, and it has always met strong opposition from some national politicians.
Startups and capital market players now hope that can change, calling for a number of key reforms in the open letter. These include:
- Increasing financing options for European growth-stage venture capital firms, as many scaleups end up relocating to the US because they can’t access sufficient funding in Europe
- Creating more incentives for both retail and institutional investors to invest in European companies and to create a tax and regulatory environment that removes barriers in investment
- Eliminating cross border transaction costs for investments across Europe
- Improving financial literacy of European citizens, as currently 72% of Europeans aren’t investing their savings at all.
The bubbling IPO market
Many European scaleups — such as Klarna, Vinted, Northvolt and Bolt — are actively preparing for an IPO and waiting for more favourable market conditions to go public. The vast majority of them want to list in the US, not in Europe. Some of Europe’s biggest tech successes, such as UiPath, Spotify and BioNTech, also decided to go public on American stock exchanges.
“Europe could produce the best startups in the world — and in many sectors it already does — but without the right capital and potential exit markets, we’ll never reach our full potential,” says Clark Parsons, ESN’s CEO. “Too many founders move their startups to the US, or go public on a US-based stock exchange, because of the ease of access to deep pools of capital. This makes it much harder to establish a flywheel, since the brains and the gains end up elsewhere, causing Europe to miss out on much of the later benefits, even including higher pension returns.”
The open letter suggests that, in 2021 alone, there were more tech IPOs in the US than in Europe over the entire period from 2015 to 2023; it also says that 50 European-founded companies have filed for an IPO in the US since 2018.
Read the orginal article: https://sifted.eu/articles/european-stock-exchange/
