Could Pisces replace AIM, or will it crash and burn?
The FCA’s rules on the new Pisces private market framework have been published. It’s now over to exchange groups to apply to become operators, with trading expected to commence before the end of the year.
It’s hoped these new types of platform, which facilitate the trading of shares in private companies, will address a long-standing liquidity gap for growth companies and early investors, as well as offering a potential bridge for companies seeking a later flotation on a public exchange.
But will it work? This week the FT offered a rather uncharitable view: Pisces “makes for an exciting rollback of securities regulation to pre-1980 standards that we imagine will appeal mostly to criminals, lower-league football club owners and, ultimately, lawyers.”
It’s true that Pisces regulations are far more lax than public stock exchanges – that is, after all, the point.
FCA officials have conceded that, to no one’s surprise, the fact market abuse rules don’t apply means there is more scope for the market to be abused.
And it will be – there is no question of that. Scandals will pop up on Pisces at some point, as has happened in every market since the dawn of time.
The real question is on their scale and frequency. The odd bad apple won’t deter investors, but a few big baddies could blow up the whole project.
A further question is Pisces’ effect on AIM. Several investors have told me that Pisces will be the final death knell in the ailing AIM – which is why LSEG are so keen to take advantage of the scheme, to keep their customers in-house.
We’ve already seen a spate of small caps quit the exchange in search of private market alternatives, including the £5m minnow Brighton Pier, which moved over to JP Jenkins.
The reason Brighton Pier set sail? Soaring costs of being on AIM, which it said had exceeded £300,000 a year. If Pisces offers a cut-price alternative with enough liquidity, many will surely follow.
Maybe an AIM exodus is precisely what Pisces needs to get off the ground. Crowd the exchange with reliable old AIMers and keep the baddies at bay.