Another European SMEs Exchange

In April we wrote a piece highlighting how European corporates should try to tap into the US and Asian investor pools to survive. In 1H2012 new issues of Bonds have represented more than 50% of bonds+loans, as opposed to less than 30% in 2011. And it seems that domestic markets issuance represented only about 10% of these, with cross-border bond issuance accounting for most of the capital market debt raised. This seems pretty straight forward for large companies but for SMEs it is not as easy. What if the European Commission came up with a European JOBS Act (Jump Start Our Business Start-ups), which in the United States eased the rules for small businesses raising equity capital for expansion? What if it came up with a JOBS Act that would enhance issuance of also bonds and not only equity by SMEs? On paper somebody has come up with a proposal: NYSE Euronext. It aims at launching the Entrepreneurs’ Exchange: cutting costs and making listing and trading in small-company shares more profitable than it is today on the SME markets that already exist such as AIM or Alternext.

The key point to me, apart from the reduced costs, is that companies would not only be able to raise finance through IPOs (equity) but also through initial bond offerings. Another idea in the pipeline is also to have companies issue investments that would convert from bonds into equity. Could I dare ask also for an SME ABS segment? In reality it is going to be tricky for NYSE Euronext, all the more so as they are going to transfer about 900 companies from Alternext and Euronext's B&C listings to the new exchange. If governments and banks do not land a hand, private intiatives can give it a try.