A showcase for success
Commentary by Florence Bindelle, Secretary General of EuropeanIssuers
Equity financing is vital in allowing companies to obtain capital and the EU must continue to make it easy for them to fund growth or new development.
I offer my congratulations to all the companies chosen as 1000 Companies to Inspire Europe! The success stories showcased in this report are truly inspiring and serve as reassurance that there is growth and job creation in Europe. I also congratulate London Stock Exchange Group for this initiative, which recognises dynamic, high-growth companies and acknowledges the importance of capital markets to finance growth.
Although the main direct stakeholders of capital markets are the companies being financed and the investors that support them, the indirect benefits of well-functioning capital markets accrue to the whole economy. As recently recognised by the EU policy makers, capital markets, especially for equity, play a crucial role in the economy by enhancing the shock-absorption capacity and allowing for more investment without correspondingly increasing levels of indebtedness.
“Capital markets play a crucial role in the economy by allowing for more investment without correspondingly increasing levels of indebtedness”
What are the benefits of public offers and listing for companies? By providing access to equity finance, stock markets allow firms to realise growth options. Studies demonstrate the unique role of equity in providing permanent risk capital which cannot be financed in the same way by debt, requiring a guaranteed return. Thus, the risk capital financing enabled by public offers contributes to innovation, which is particularly relevant for growth in developed economies.
This is why EuropeanIssuers, which represents the interests of publicly quoted companies across Europe, promoted the creation of the European IPO Task Force. The Task Force, set up in 2014, included experts with direct knowledge and experience of initial public offerings and coming from different parts of the capital markets’ ecosystem. Supported jointly by EuropeanIssuers, InvestEurope and the Federation of European Securities Exchanges (FESE), the Task Force agreed recommendations on how to make the European IPO markets work better for the real economy. These included the creation of a more balanced and flexible regulatory environment for the Emerging Growth Companies, improving the market ecosystem to better serve companies at different stages of growth and different types of investors and the creation of an equity culture in Europe.
“Equity finance is the only one that can handle entrepreneurial risk”
In accessing public equity markets, companies can obtain capital at a reasonable cost which they can use to finance organic growth or new ventures, without a fixed level of return. Compared to other forms of financing, equity finance is the only one that can handle entrepreneurial risk. Public listing can also help to lower other financing costs, to strengthen brand recognition and to gain prestige. Finally, public equity markets play an important role in the ‘funding escalator’, with different modes of financing for companies at different stages of development.
Recognising the importance of public capital markets and encouraging the diversity of markets, in 2013 the European Commission initiated The European Small and Mid-Cap Awards Ceremony. Now an annual event, it’s organised jointly by EuropeanIssuers and FESE and promotes the best practices and success stories of the most dynamic companies financed by European public capital markets.