Companies wishing to access the capital market are required to pay Borsa Italiana a fee that depends on the company’s capitalization and ranges from 35 thousand euros for Euronext Milan to 15 thousand euros for Euronext Growth Milan
Strocchi: “To access Euronext Growth Milan, the issuer must place at least 10 percent of its capital. For the Mta, on the other hand, it must have a free float of no less than 25 percent of its total capital, and for the Star segment, no less than 35 percent.”
The Stock Exchange represents what Simone Strocchi, founder and president of Electa Ventures interviewed by We Wealth, calls the “best ally” of entrepreneurs who wish to support “ambitious growth programs.” By attracting qualified resources. But not all companies can enter the capital market. Here is a summary of the main costs of preparing for the landing. And of the steps involved in the listing process.
The costs (fixed and variable) of listing
As noted on the Borsa Italiana website, listing costs fall into two main strands. Fixed expenses incurred in the IPO (Initial public offering) process are related to the remuneration of consultants, auditing firms, law firms, advisors, and communication companies accompanying the company in the listing process. Variable costs, on the other hand, relate to the placement of shares with investors and are defined as a percentage of the amount raised. “The company that intends to list itself provides a mandate to an investment bank, a global coordinator, to carry out all the prodromal activities for admission to the stock exchange. This takes place along with a team of lawyers and consultants to help draft the admission document and put in place all those activities necessary to calibrate the interest of potential investors,” Strocchi explains. “The costs of such a process amount to 7-8 percent of the capital raised (if we are talking about 50 million euros, for example, they are around 3.5-4 million). With Gaussian anomalies. For micro companies raising between 3 and 4 million euros, this percentage could be as high as 8 percent, while for larger ones (raising more than 50-100 million euros), it could slip as low as 5 percent.”
In addition, companies are required to pay Piazza Affari a fee that depends on the company’s capitalization. It ranges from 35 thousand euros for Euronext Milan (which targets medium and large capitalization companies) to 15 thousand euros for Euronext Growth Milan (dedicated to small and medium-sized companies). Note that, precisely for SMEs, the Budget Law 2022 confirmed the 50 percent tax credit up to a maximum amount of 200 thousand euros aimed at covering consulting costs incurred by December 31, 2022, and sought precisely at listing on the Stock Exchange.
Listing on the stock exchange: the requirements to be met
“Companies that intend to list on the Stock Exchange in Italy can access three lists: the Euronext Growth Milan (former Aim), the Mta and the Star,” Strocchi recalls. “A first requirement is that to access Euronext Growth Milan; the issuer must place at least 10 percent of its capital. For the Mta, on the other hand, it must have a free float of no less than 25 percent of its total capital, and for the Star segment, no less than 35 percent.” If there are no capitalization limits in the case of Euronext Growth Milan, the expert continues, for the Mta we are talking about at least a 40 million market cap. “The company must be transparent and ready to deliver constant disclosure to the market. On the Euronext Growth Milan, these results must be reported at least semiannually by preparing an accounting document. For the main market (the Mta, ed.), the informative activity becomes more frequent, at least every three months.”
In addition, Strocchi points out that companies should have an IT-supported aggregate data reporting system. “All companies entering the stock market should implement internally evolved IT and management systems capable of surfacing certain data in real-time and minimizing human intervention.” It is recommended, he continues, that they issue press releases to inform about the possible acquisition of new customers, the opening to new markets, or the presence of conditions that could compromise their results. And finally, the market can, in turn, view documents prepared by third parties that review the company’s performance.
The stock market listing process
“To access the market, one must have the ability to submit one or two financial years before the application for listing. The issuer must then prepare what is known as an admission document. It begins with an enumerating series of risks and continues with a description of the company and its positioning in the reference markets for products and services,” Strocchi says. As described on the Borsa Italiana website, the listing process is divided into different stages depending on the reference market. In the case of Euronext Growth Milan, we talk about a listing preparation phase of 1-6 months that consists of the definition of the strategy and competitive positioning; the preparation of financial data and the business plan, and the identification of the listing perimeter, organizational structure, and corporate governance, until the structuring of the offer. It is followed by due diligence, order collection, and pricing phase of 2-3 months; until the submission of the application for admission. In the case of Euronext Milan, the listing preparation phase lasts 2-5 months, followed by due diligence and pre marketing phase of 2-3 months; a preliminary and admission to listing phase of 2 months; and a placement phase (with company-investor matching, order collection, pricing, and share allocation) of 15-20 days.
Why list on the stock exchange: the advantages
Listing, Strocchi concludes, allows small and medium-sized Italian companies (and others) to access capital by avoiding “the drag-on-sale clause.” In other words, each shareholder will have the power to determine when to liquidate the investment on the market without implying a collective choice of all shareholders. “This is most important for entrepreneurs who wish to express themselves in the markets to support ambitious growth programs. For them, the stock market is the best ally because it does not arrogate lead the company to sell to a third party. To support our country’s growth, we need to motivate these companies to access stock exchange listings. That is the first step in creating sector champions (because the listed company becomes more attractive to high-capacity managers) and creating moments of sector cohesion.” Electa, he concludes, has imported and evolved “an innovative way of accessing capital, reversing the process. With an aggregated investor lineup and capital already raised, we look for companies interested in listing. Following a private negotiation, if the company accepts, the listing takes place with an admission to trading based on a parterre of investors intervening in the capital of the candidate company. A method that we believe is particularly suitable for accompanying especially SMEs to the stock exchange listing.”
