[attach id=496554 size="medium"]Photo: Matthew Mirabelli[/attach]
The CEO designate of the Malta Stock Exchange has hinted at the possibility of fiscal incentives for SMEs that use its Prospects product to raise financing, something that was described as a ‘make or break’ by some practitioners.
Practitioners asked at the launch whether secondary trading would benefit from the waiver of capital gains, among other things – but the MSE delegation was only able to say that this was the remit of Finance Minister Edward Scicluna, who – put on the spot – said he was “ready to consult”.
“Without the tax advantages, it would be a non-starter,” Louis Degabriele and Conrad Portanier had agreed.
But Mr Zammit hinted that there was reason to hope.
“The Finance Minister knows that we are actively looking into making sure that qualified investments and qualified companies are incentivised for investing. We have tax consultants working on this and we are being supported by the Finance Ministry. So watch this space!” he smiled.
Another aspect raised by practitioners was the recommended corporate adviser fee of between €25,000 and €35,000, which they felt would be too low even to justify taking on the liability. The Malta Stock Exchange is basing its marketing on competitiveness and wants to keep the total listing costs to below €50,000 to ensure that Malta is less expensive thanjurisdictions like Ireland – even though member states like Poland will be cheaper.
It seems that the practitioners’ concerns may have been premature as the MSE has already received a steady stream of applications for corporate advisers.
“With all due respect to the industry, this is a new venture and a new business model for all of us. There are new roles that the corporate adviser will be taking on board. As with all new things, it is only natural that there should be questions and concerns as to how this role will be taken on,” he said tactfully.
“We think it is only natural that the fees should reflect their role and responsibility.”
He sees the approval of advisers as a crucial first step as, without them, companies cannot start the application process.
We are actively looking into making sure that qualified investments and qualified companies are incentivised for investing
“This gap is now being filled in. It is a very good indication that Prospects will work, irrespective of the concerns voiced,” he said.
Who will the companies be? Although Maltese SMEs interested in raising up to €5 million should see this as a golden opportunity, the biggest hurdle is cultural. However, the way that Prospects has been structured is aimed directly at overcoming this, as it falls below the threshold of the Prospectus Directive and therefore will not require the same levels of corporate governance from the company – as this is left to the corporate adviser to help with.
“We have structured the rules as an exchange-regulated market – rather than one regulated by the listing authority. But we hope that these companies will grow with us. Prospects’ requirements are small in terms of finance and regulation, but it imposes a discipline which makes it much easier to then transfer to the regular market. It will not happen overnight. But just as the MSE looks back on 25 years of experience, we also look 25 years ahead!” he said.
The new product has also been getting positive feedback from overseas – which had been identified by MSE chairman Joe Portelli as a key market – even though the fact that it is not covered by the directive means that it will not confer passporting rights.
“We are marketing Prospects by highlighting its cost-effectiveness and speed – 10 days for a reply once you have all the documentation in place.
“We have a one-stop shop infrastructure at the Exchange from pre-trading to post-trading clearance and settlement. So we are very quick to market and that is where our competitive advantage is.”
Roadshows have already been organised in Spain and Italy and others are planned. A team from the Exchange was in China last week to promote the Maltese capital market and Prospects – where substantial interest was shown – and Mr Zammit said that there should be no issues dealing with, for example, a Chinese corporate adviser, who would have to abide by the strict eligibility criteria across time zones and cultural differences.
“The fact that a Chinese company gets legal and financial and corporate advice from a Chinese adviser is only natural as they would know the company. But the corporate adviser will be an ongoing link between the company and the Exchange.
“That is another big selling point for us. It is not like in the regulated market where you get a sponsor who brings you to the market and then is gone. The corporate adviser has to be there for the duration of our relationship with that company.”