The Government should back the establishment of a €400 million cornerstone fund to invest in Irish initial public offerings (IPOs), a group of officials involved in Irish equity markets said in a pre-budget submission.
“Over the past decade, for a variety of reasons, Irish equity capital markets have underperformed and remain underutilised as a funding mechanism for scaling Irish companies,” the so-called Irish Equity Market Forum, comprised of officials from the Euronext Dublin stock exchange and corporate law, accountancy and stockbroking firms, said in its submission.
“We are now at a critical juncture, and urgent action is required by the Irish Government and all domestic stakeholders – exchange, brokers, lawyers, accountants, registrars and central securities depositories – to change the trajectory and re-establish public equity markets as a viable and long-term funding avenue for Irish companies.”
The submission fleshes out headline proposals from the Euronext-led group that were previously reported by The Irish Times earlier this month, as it seeks to reboot a market that has seen the number of company listings decline by 40 per cent in the past decade to 26 today. This has been driven by companies being taken private, often in private-equity backed deals, moving listings elsewhere, and a dearth of IPO activity.
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Smurfit Kappa is set to leave the exchange next week as it merges with US rival WestRock and moves its main listing from London to New York. It follows on from the exit of fellow Iseq heavyweights CRH and Flutter Entertainment in the past 10 months.
The submission suggests that the Ireland Strategic Investment Fund (ISIF) and pillar banks could participate in the cornerstone fund by highlighting other instances where State-owned fund and banks have co-invested in initiatives. These include investment firm BGF Ireland, established in 2017 to provide equity financing to Irish small and medium-sized companies, and Pearl Residential Equity Fund, established five years ago to provide equity financing for residential projects throughout the State.
The paper also outlines governance structures for a cornerstone fund and investment criterial, including that it would not be the lead investor in any IPO and would take no more than 15 per cent in an individual company.
The Irish Equity Market Forum has also called on the Government to launch a tax-friendly retail investment plan along the lines of the popular schemes in some other European countries, including the individual savings accounts (ISAs) scheme introduced in the UK 25 years ago.
It advocated that an Irish so-called growth and returns account be launched, which would allow individuals to invest as much as €40,000 for a period of five years directly or indirectly companies listed in the European Economic Area (EEA).
The Government here would be prohibited by EU state-aid rules from launching a scheme aimed at incentivising investment in stocks on the Iseq. A wider scheme focused on stocks across EEA would be of limited benefit to the Irish market.
The document, filed with the department in May in advance of Budget 2025, also reiterated long-standing calls from Euronext Dublin for the introduction of tax incentives to allow company founders to sell some of their shares as part of a flotation.
Neale Richmond, Minister of State for with responsibility for financial services, told The Irish Times last week that the Government is keen to help the stock exchange in Dublin “recover” from several high-profile exits and a paucity of new flotations in recent years and is examining if it can introduce tax incentives to boost activity.
“The scheme [proposed by Euronext] has got quite clear merits. We’re keen to talk to them further. We want to make sure that we can help them recover,” he said.
Companies listed on the Euronext Dublin contributed €12.4 billion to the domestic economy in 2022, according to a report written last year by Grant Thornton. It had been commissioned by the exchange and local stockbrokers.
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