Mark Oliphant, Head of Communications at The International Stock Exchange Group, explores how agile public markets can help the economic and social recovery from COVID-19.
Stock exchanges have been somewhat out of fashion in recent years and this seemed to be a trend reinforced earlier this year during the onset of the coronavirus (COVID-19) global pandemic. However, the responsiveness of exchanges in the face of the COVID-19 outbreak has shown that an agile approach from public markets means that they can play a role, alongside private markets, in assisting ‘corporate UK’ to build back and build back better.
Public markets out of favour
Even prior to the spread of COVID-19, Initial Public Offerings (IPOs) have been steadily falling in recent years. There has been a growing trend for companies to stay private for longer, with business owners increasingly choosing to exit by selling to private equity.
At first glance, COVID-19 seemed only likely to reinforce this trend as it sent the major stock exchange indices into a spin, listed open ended real estate funds were forced to suspend as the property market froze with uncertainty and quoted companies struggled to grapple with reporting and filing obligations.
However, the impact of COVID-19 has touched every business. While some sectors, such as healthcare, technology and logistics, have seen what might be termed ‘upsides’ from the generally awful predicament and others such as travel, retail and hospitality have been hardest hit, across the board there has been no escape and little respite.
A place for agile exchanges
Companies have been able to access government assistance in addition to regular sources of funding and of course, private equity houses continue to sit on plenty of dry powder. However, there is still room for stock exchanges, such as The International Stock Exchange (TISE), to play a role in helping companies, both short and long term.
Established in 1998, TISE provides a responsive and innovative exchange where today there are more than 3,000 listed equity and debt securities with a total market value of more than £400 billion.
Since the onset of the pandemic, we have encouraged current and prospective issuers on TISE to engage with us at an early stage regarding the impact of COVID-19 on their business and as such, what it means in respect of their listing.
We are taking a pragmatic approach to balancing the interests of all market participants, including both issuers and investors, in order to ensure the continuation of a fully functioning market. This is a similar approach to many other exchanges, which demonstrates the willingness of those overseeing venues to ensure that the public markets can mitigate the effects of COVID-19.
A responsive and cost-effective approach
Yet, unlike most traditional stock exchanges, a responsive approach is integral to our offering. It has helped attract trading companies, investment vehicles such as Real Estate Investment Trusts (REITs), and debt issuers to our market. This responsiveness can assist corporates as they start to turn their attention away from the short-term challenges and towards the long-term future.
While traditional venues are seen as overly bureaucratic and expensive for a trading company listing, TISE provides a more proportionate and cost-effective offering which makes it viable for businesses to IPO at an earlier stage, perhaps offering existing owner/managers of Small to Medium-sized Enterprises (SMEs) in particular a partial or full capital exit. Similarly, TISE is home to more than 30% of all UK REITs because the regime is pragmatic and the fees are very competitive.
Equally, TISE’s value for money and efficient listing service has attracted companies ranging from blue chip multinationals and a wide variety of UK corporates that are raising debt finance. This includes securities issued by private equity groups to help finance their acquisitions of portfolio companies (which of course, themselves, could be exited via a listing at a later stage).
All these products may be eligible to enter our green market segment, TISE GREEN and more broadly, there has been a wave of listed sustainable and social bonds in response to COVID-19. Indeed, it is these issuances which beg the question about how we will operate as a society in the future and what this means for the future of many businesses.
Stock exchanges such as TISE can provide a complementary offering to the private markets and one which is well placed to help corporates adjust to the ‘new normal’ and ultimately, assist us all to not just build back but build back better.
Mark Oliphant is Head of Communications at The International Stock Exchange Group.
Address: PO Box 623, Helvetia Court, Block B, 3rd Floor, Les Echelons, St Peter Port, Guernsey, GY1 1AR
TISE is a registered trademark of The International Stock Exchange Group Limited (registered in Guernsey with company number 57524. It wholly owns The International Stock Exchange Authority Limited (Guernsey registered company number 57527), which is licensed by the Guernsey Financial Services Commission to operate an investment exchange under the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended.
Note: this article does not constitute investment or other professional advice and should not be construed as a recommendation to buy, sell, hold or solicit any investment, security or other financial instrument or product.