(BFM Bourse) – Since the beginning of the year, more than ten listed companies have chosen to leave the regulated market of Euronext Paris for Euronext Growth and its relaxed rules. What are the reasons for this exodus to the fetish compartment of small and medium-sized enterprises?
Atari, Catering International Services, Hexaom, Hopscotch Group, Micropole, or more recently 2CRSI…. While these listed companies operate in totally different worlds, they do have one thing in common. These companies have chosen to transfer their shares from the regulated market of Euronext Paris to Euronext Growth, the compartment dedicated to small and medium-sized companies.
The designer and manufacturer of high-performance servers 2CRSI gave in to the transfer sirens on Euronext Growth. The Strasbourg group recently announced its intention to leave the regulated compartment of Euronext Paris on which it has been listed since 2018 for less restrictive skies.
Since 2009, companies listed on a regulated market can request the admission of their shares to trading on Euronext Growth. If this exodus towards this compartment was still confidential in recent years – since only 4 companies tried the experiment in 2018 – the phenomenon gained momentum from 2020. That year, they were 13 to take the plunge. Then in 2021, of the 41 new listings on Euronext Growth Paris, 15 are the result of transfers of companies listed on the regulated compartment of Euronext to the former Alternext.
“Being a big player in Euronext Growth rather than being the thumb of Euronext C”
Since the beginning of the year, 14 companies have already contributed to the procession of departures from the regulated market of Euronext Paris, i.e. almost as many as for the whole of 2021. Several companies have thus made their comeback on Euronext Growth, like the manufacturer of high-tech boxes Egide or the Compagnie Lebon investment holding company or the consumer electronics specialist Cibox.
“For a company, it is better to be a big player in the Euronext Growth compartment than to be the small thumb of Euronext C. Euronext Growth has succeeded in finding its place in the Euronext ecosystem. The quality of the files is has indeed improved and investors have appropriated this compartment. On the side of the company concerned, it will reach an audience of investors more suited to its size”, notes Thomas Hornus, partner at EuroLand Corporate.
However, this transfer is not automatic. The company that claims a change of compartment to be listed on Euronext Growth, must have a market capitalization of less than one billion euros and have a free float of at least 2.5 million euros.
They must also secure the services of a “listing sponsor”, who acts as a coordinator between the listed company and the market place. This “coach” prepares the IPO of the company and helps it, once listed, to comply with its disclosure obligations. The companies have a period of three months from the transfer to find a listing sponsor.
Other conditions prior to the transfer must be met: the holding of an ordinary general meeting of shareholders intended to rule on this transfer project or the distribution of two press releases, one of which at least two months before the date envisaged for the transfer. This communication aims, among other things, to inform the public and shareholders of the reasons for this operation.
Why Euronext Growth attracts more and more?
These transfer projects all have one thing in common, that for the companies to free themselves from certain operating constraints specific to the Euronext Paris market. First of all, the regulatory corset surrounding companies listed on Euronext Growth is much looser than on the regulated compartment of Euronext Paris.
Companies can adopt the accounting framework of their choice, either by publishing their consolidated accounts under French accounting standards or by favoring international IFRS standards. A company listed on the regulated Euronext market must publish its consolidated accounts on the basis of IFRS standards. Still in terms of accounts, the maximum publication times are longer on Euronext Growth. A company listed on this compartment has 4 months to publish its first half and annual results, whereas a company trading on Euronext Paris will only have 3 months to do so.
These multiple regulatory requirements also have a cost that some SMEs cannot or no longer want to bear by being listed on a regulated market. Admittedly, the transfer itself involves a cost which is defined according to a scale depending on the market capitalization of the company, but it is a “one-shot” cost.
To these costs must be added the fees of the various stakeholders, including the listing sponsor, who must assist the company during this transfer process. But companies transferred to Euronext Growth quickly find their account. By being subject to more flexible regulations, they realize savings each year compared to a listing on Euronext Paris. A weighty argument that hits home with this ecosystem…
What are the consequences for minorities?
If the company in question has an interest in changing sub-funds, such an operation is not, however, neutral for individual shareholders. Moreover, the press release presenting the company’s proposed transfer to Euronext Growth warns of the main consequences of this change in size on the stock market.
In terms of periodic financial information, the company’s obligations will be reduced. Only the accounts for the first semester and an activity report relating to these accounts will be required within four months of the end of the first semester. The half-year accounts are not required to be reviewed by the Statutory Auditor (CAC), whereas on the regulated market, the accounts must be subject to a limited review by the CAC. With regard to the annual accounts, the company will be required to provide four months after the end of the financial year, an annual report (or a universal registration document incorporating it) including at least its annual accounts (and consolidated accounts), a management report and the reports of the statutory auditors.
Of course, companies will have to deliver accurate, precise and sincere information, by bringing to the attention of the public any information likely to significantly influence the price and any information relating to the operations of its managers. Regulated information (and in particular inside information) must always be disseminated effectively and in full.
In terms of changes in shareholding, companies listed on Euronext Growth only have to communicate to the market when thresholds (up or down) of 50% and 90% of the capital or voting rights are crossed. On the Euronext Paris market, the levels in question are tighter. However, companies new to Euronext Growth remain subject to the same threshold crossing rules that prevailed in their original compartment for a period of 3 years.
The provisions relating to takeover bids applicable to companies listed on Euronext Paris will also remain in force during this period of three years from the effective date of listing on Euronext Growth Paris. Namely, filing of a mandatory public offer:
– if the threshold of 30% of the capital or voting rights is crossed;
– in the event of an increase of more than 1% in less than 12 consecutive months, by a person holding alone or in concert a stake of between 30% and 50% of the capital or voting rights.
As this is an unregulated market, the transfer to Euronext Growth Paris could result in a change in the liquidity of the share which could be different, or even lower, than the liquidity observed since the start of the company’s listing on the regulated market of Euronext Paris.
Is the reverse possible? The answer is yes. A company listed on Euronext Growth can play in the big leagues by requesting a transfer to the regulated compartment of Euronext Paris. The cases are rare but they do exist. Over the past nine years, only three companies have achieved such a feat: Genfit in 2014, Figeac Aero in 2016 and Solutions 30 in 2020, 15 after its first listing on the Free Market – which was not yet called Euronext Access at the time. era, after a passage on Euronext Growth.
Even stronger, the companies Orège in 2013 and Voltalia in 2014 left the Free Market for the regulated market of Euronext Paris without going through the intermediate box of the Euronext Growth or Alternext compartment at the time.
Sabrina Sadgui – ©2022 BFM Bourse
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