As Ireland slowly emerges from a five-year period of economic strife, it is vital that policymakers, industry participants, and political thought leaders turn their minds to optimising our recovery.
As part of that, the role of the Irish Stock Exchange needs radical and urgent thinking. After effectively losing important companies such as CRH, Greencore, United Drug, and DCC to London, the sceptics are already calling time on Ireland’s equity market.
Why should any developing company take the Irish Exchange seriously when they can easily migrate to the broader and deeper capital pools in London and New York?
What benefit exists for firms to choose Dublin, sitting in the midst of a troika-managed economy, as a platform from which to issue and trade shares?
In fairness, neither the Irish Stock Exchange or its stockbroker members have done enough to fight these perceptions. It has been too simple for quoted and unquoted companies to be lured by the bright lights shone by global investment banks offering a better capital markets experience abroad.
It may be impolite to say so, but the facts are that many senior executives in Irish companies have been disappointed by an absence of energy and dynamism in the stock market, caused in part by the financial challenges that have faced Irish stockbrokers since 2008.
However, that momentum may be turning. The challenge is to engineer a stock market that does a number of simple things well for developed and developing companies. These are:
*Provide high-quality and world-class equity research that profiles and analyses Irish companies and the markets they serve to investors across the globe;
*Organise and manage sophisticated investor marketing programmes that expose Irish companies to the correct institutional fund managers and provide detailed and insightful feedback for board members and senior executives;
*Make the issuance and trading of shares in Irish companies cost competitive with, at a minimum, London, and preferably New York and Singapore too, by sharply reducing stamp duty on shares;
*More actively market the abilities and services of the Irish stockmarket to private companies in Ireland on a sustained basis through investor and stockbroker meet and greet events, and;
*Consider a restructuring of the Irish Stock Exchange to more closely align it with London as a means of deepening its liquidity.
The proof of this pudding will be in the eating. Too few Irish companies have felt it worthwhile to list on the Irish stock market in recent years.
The Government has been seduced by global investment banks when considering the challenges of monetising State assets as a means to cut the deficit. Instead of contemplating the sale of these assets to global corporations, why not liberalise them closer to home?
Imagine, for example, if land under Irish forests was placed in a firm that was offered to investors through the Irish Stock Exchange under these conditions;
*A minority stake is retained by the Government;
*Irish institutional and retail investors are offered preferential terms in any IPO to reflect the strategic value of that land to the nation;
*The firm is engineered to offer a modest but sustainable annual dividend yield. Such a structure keeps Irish assets away from vulture investors, provides much capital for the exchequer, and helps energise the sovereign stock market.
It is only by extensive and aggressive out-of-the-box thinking that we can reenergise the Irish Stock Exchange and, in so doing, help protect and create jobs inside the market itself and within the companies who rely on it for capital raising.
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