The government will set out its plans for a “world first” private stock market tomorrow in a bid to revive the UK’s flagging IPO pipeline, City AM can reveal.
At her maiden Mansion House speech in the City, the Chancellor Rachel Reeves will reveal proposals to legislate in May next year for a regulated stock exchange system called Pisces, where investors can trade shares in private companies, Treasury sources said.
Pisces – the Private Intermittent Securities and Capital Exchange System – was dreamt up by the previous government as part of efforts to revive UK equity markets but its launch was thrown into doubt by the election in July.
The platform has been designed to allow private firms to trade shares at intervals in a style akin to the public markets, acting as a “stepping stone” for firms mulling a public float and offering investors an opportunity to sell their stakes in companies.
Officials have described the market as a “world first” that will allow companies to choose how often they trade their shares and who buys them.
“This is a significant step for our capital markets, giving investors the chance to get in on the ground floor of some of the most exciting companies around and supporting those businesses to grow,” a Treasury source said.
While an initial consultation on the market closed under the previous government in April, the Treasury’s response was shelved until after the election. Reeves is now expected to publish a formal response to the consultation this week.
Labour ministers have already thrown their support behind the market since taking power in July, with Reeves confirming that shares traded on the exchange will be exempt from stamp duty at her Budget last month.
The new market will form the latest effort by Westminster to shore up the UK’s markets after a drop off in fresh listings and flurry of takeovers and de-listings in the past two years.
While debuts on the London Stock Exchange’s main market and junior AIM exchange have picked up since June, the bourse has hosted only 12 IPOs this year, raising just under £450m, according to London Stock Exchange data.
The performance puts the market on course for one of its worst years on record. The London Stock Exchange has also been dealt a series of bruising snubs as firms including the Cambridge chipmaker Arm seek out deeper pools of capital in New York.
Under the new Pisces framework, the London Stock Exchange is working on plans for a market called the Intermittent Trading Venue. Other exchanges will be able to design their own versions of the market.
At a conference yesterday, Julia Hoggett, boss of the exchange, addressed the prospect of such a system, saying it would create “transparent price formation” and allow investors to “get out and trust the price they are given”.
While the government is hoping Pisces will revive the number of companies floating on public markets, critics claim it could remove an incentive and actually weigh on IPOs further.
“The burden of a public listing will still act as a deterrent for many companies, so PISCES is unlikely to deliver a strong pipeline of IPOs as intended,” said Myles Miston, boss of private markets firm Globacap, which is planning to launch its own version of the market.
Plans for Pisces will form one of the central pillars of Reeves’s pitch to the City at Mansion House on Thursday. She is also expected to announce a package of pension fund reform designed to unlock a wave of capital from the UK’s fragmented local government pension system.