On 22 November 2017, Stefano Alderighi, the WFE's Senior Economist – Researcher attended a workshop entitled 'Equity Financing of the EU Economy'.
The workshop was hosted by the Federation of European Securities Exchanges (FESE), in collaboration with Better Finance (BF), the European Investment Bank (EIB) and the European Investment Fund (EIF), and SME funding was a key area of focus.
In the last two years the WFE has undertaken extensive research on how to facilitate access to equity finance for SMEs, both independently (click here) and in collaboration with an external partner, the Milken Institute (click here).
Whilst the workshop was centred on European capital markets, the contributions and roundtable debate on the ‘Role of SME Growth Markets’ reflected a number of key themes in line with the WFE’s own findings and recommendations. In particular, it emerged that early stage equity capital (and in particular venture capital) should play an increasingly important role in supporting and scaling-up SMEs along the ‘funding ramp’, as noted in the WFE’S research as well.
More importantly, it was emphasised that to attract SMEs towards listing, disclosure requirements should become leaner, as current European prospectuses are lengthy documents that companies struggle to prepare on one hand, and investors find difficult to read and digest on the other. This was also in line with the WFE’s research outcomes.
Roundtable participants emphasised how financial education, the production of relevant documentation, and the right amount of disclosure requirements should lie at the heart of a conscious risk-taking behaviour, especially in the context of retail investment. Stakeholders in the SMEs ecosystem should work to define what is a small (cap) company in the listing environment, as the lack of an ‘SME definition’ can hamper the effectiveness of the existing policies. The lack of an agreed SME definition and the difficulty in finding one is also a point the WFE makes in its research reports.