The Irish Stock Exchange's plans for its new iteq market for technology companies have been given a major boost following the Revenue Commissioners' agreement that companies with a dual iteq/Nasdaq listing will not have stamp duty levied on share dealings.
Currently, stamp duty of 1 per cent is levied on share dealings, a system that raised £180 million for the Exchequer last year. The levying of stamp duty on share dealings on the Irish market has meant that many investors, especially overseas fund managers, have dealt in Irish stocks either on Nasdaq, where no stamp duty applies, or in European markets, where a far lower rate of duty is levied.
The success of the ISE in getting iteq-listed companies exempted from stamp duty on condition that they also have a Nasdaq listing, is likely to result in strong pressure to have stamp duty eliminated on dealings in Irish companies which already have a Dublin/Nasdaq listing. This pressure could come from companies such as Ryanair and Iona - and even from companies which either have a sole listing in Dublin or have dual Dublin/London listings.
The agreement by the Revenue Commissioners to exempt iteq/ Nasdaq-listed companies from stamp duty comes less than six months after any change in stamp duty on share dealings was ruled out by the Minister for Finance, Charlie McCreevy.
At the launch of the Bacon Report into the future of the Irish stock market last December, Mr McCreevy said: "There is constant lobbying to reduce it [stamp duty] and I haven't been able to accede yet. I won't do it in the Finance Bill, but it is kept under review."
Confirming the stamp duty changes for the new market, stock exchange managing director Mr Tom Healy said that the exchange had argued that as iteq was essentially a replica of Nasdaq, there was no reason why stamp duty should be levied on ADR trading in a company's shares on one market and not on another overseas market. This argument was apparently accepted by the Revenue Commissioners.
Mr Healy said that the stock exchange has always sought, at the very least, a reduction in stamp duty on share deals, on the basis that dealings in Irish shares were being diverted to overseas markets. While he would not be drawn on whether the exemption for iteq companies would be used as leverage for more widespread changes, it seems certain that the stock exchange and the investment industry will press for changes to be introduced in the next Finance Bill.
While a number of Irish companies such as Ryanair, Iona, Icon and Riverdeep have existing dual Dublin/Nasdaq listings, the reality has been that in most cases the bulk of trading has taken place on the stamp dutyfree Nasdaq market.
Stamp duty is one factor behind the decision of Irish hightech companies like Trintech, Parthus and Conduit to bypass the Irish market altogether and take their listing to London, Nasdaq or the Neuer Markt in Frankfurt.
Mr Healy said that, apart from the elimination of stamp duty, new listing rules for the iteq market will make it more attractive for Irish technology companies. One new rule would mean that iteq companies, many of whom will have little turnover and substantial start-up losses, will not have to seek shareholder approval for acquisitions, except in the case of major acquisitions.
Instead, said Mr Healy, a higher level of disclosure will be required before such acquisitions can be completed. These new listing rules are expected to be approved within the next month.
It remains to be seen how attractive the iteq market will be to Irish technology companies who have the choice of Dublin, London, Nasdaq and the Neuer Markt when considering an IPO. But with electronic trading now a reality and stamp duty eliminated for iteq/Nasdaq joint listings, Dublin will be in a far better position to pitch for listing by companies who might otherwise have shunned the domestic market.
