FCA sets out plans for new Pisces private stock market
The Financial Conduct Authority (FCA) has set out its plans for a new private stock market system today as it looks to revive London’s flagging IPO pipeline and allow investors to more easily tap into unlisted companies.
In a consultation document, the City watchdog said the new stock market system, PISCES, first tabled by the previous government and confirmed by Rachel Reeves at Mansion House in November, would “open the door to more opportunities for investors to take stakes in private companies” and give firms “greater funding to help them to grow and scale up”.
“With many companies choosing to stay private for longer, there is increasing demand for investors to be able to trade shares in private companies more easily,” the FCA said. “A world-leading innovation in private markets, PISCES could provide opportunities for more diversified returns for investors.”
While the FCA intends for the new markets to operate on similar infrastructure to traditional public bourses, investors will only be able to buy shares in private firms at set intervals throughout the year.
Firms will also retain control over which investors buy shares in their company.
After closing an initial consultation on the plans earlier this year, the Treasury confirmed that companies looking to sell shares on Pisces should operate under a “new and bespoke disclosure regime for PISCES companies”, meaning they will be subject to less cumbersome reporting requirements than companies selling shares on public markets.
“We do not intend to apply public market standards, like those required by the UK Prospectus Regulation or by UK [market abuse regulation], to the information PISCES companies provide,” the FCA said in its consultation document.
Ministers have framed the plans as a means of reviving the UK’s flagging IPO pipeline after the London Stock Exchange shrank at its fastest pace ever this year.
Over £50bn worth of companies have been picked off in take-private deals, while just 15 firms have floated through IPOs across its two markets.
Ministers and regulators have looked to streamline public market rules to coax more companies onto the public exchanges, pushing through the biggest shake-up to listing rules in three decades in July.
PISCES: A “stepping stone” to a full float
The new PISCES exchange has been framed as a “stepping stone” to a full float that will prepare companies for a public market debut.
“PISCES will be an innovative new type of stock market for trading for private company shares and is a significant step forward in our reforms to capital markets,” the City minister, Tulip Siddiq, said in a statement. “It will give investors the chance to get in on the ground floor of some of the most exciting companies and support the growth of those businesses.”
However, the plans have unsettled some corners of the City and raised concerns that the new private venue could erode the appeal of a full IPO and compete with London’s two junior stock markets, AIM and Aquis.
Globacap, a share trading firm that aims to set up a market under the new PISCES framework, said the new venue was an “acknowledgement” of the decline of AIM and the new market would offer a “better replacement”.
“It will enable private companies to access the funding and liquidity they need while avoiding the complexity and expense of going public,” Globacap’s CEO, Myles Milston said. “Investors will be able to realise their gains sooner, as it will be easier for them to find buyers for their shares.”
City firms will now have until February to feed into the plans. Morning Wire revealed in November that the Chancellor is aiming to legislate for the new market in May next year.