A stark report on the Irish stock exchange by Department of Finance officials lays bare the daunting challenges facing the historic market for Irish equities.
Building materials giant CRH delists next month, cutting some €39 billion from the Irish share index. The company is pursuing a New York listing to access US infrastructure funding and higher share valuations. The possibility of gambling group Flutter following suit casts doubt over a further €30.8 billion. The owner of the Paddy Power brand sees copious opportunities in a largely untapped US market as federal states relax gambling laws.
The drive for growth marks but the latest phase in the transformation of these Irish groups into corporations of scale with global reach. Yet it has left the Irish Stock Exchange with a conundrum. The potential loss of €70 billion in the capitalisation of the market will dim Dublin’s allure for international investors – and the glaring shortage of market entrants means there is no prospect of replacing the lost value any time soon.
Euronext Dublin, the Dutch-controlled group that bought the exchange in 2018, asked Minister for Finance Michael McGrath to intervene as it sought to persuade CRH and Flutter to keep their Irish listings. McGrath’s department had contacts with “relevant market participants” but there is nothing to suggest minds will change.
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Now finance officials warn of “long-term decline” in the Irish market, saying nutrition company Glanbia, insulation maker Kingspan and Kerry, the food group might yet consider taking out US listings. In a briefing note released under the Freedom of Information Act, they say a study might yet be needed on the “loss of a functioning stock exchange for Irish-listed companies”. This is dire talk, reflecting a mood of drift and stagnation at odds with the high-growth open economy on the doorstep of the Anglesea Street exchange.
The lack of new listings is not unique to Ireland. Recent industry research shows European flotations have slumped this year to the lowest level since the global crash more than a decade ago. That flows from rising interest rates, record inflation, deeper pools of stock market and private equity capital in the US and better liquidity in its markets. On a longer horizon, the strain in Dublin is greater because of lower equity exposure by domestic pension funds and their diversification from Irish equities. Fewer brokers and the rise of passive investment via exchange-traded funds are other factors, as are Irish stamp duty rates.
By running a booming global business for listing debt and funds, the Irish exchange has proved it can be a winner. But a viable plan to boost the equity side of the business remains elusive. That must be a concern. The domestic stock market is but one capital source for business, but it is a critical one nonetheless.