Malta Stock Exchange chairman Joseph Portelli expects that its new SME financing product, Prospects, will get more interest from overseas than from Malta, but practitioners are concerned since, unlike current listings, secondary trading of Prospects listings would not benefit from fiscal incentives.
Practitioners asked following an information session last week 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 – was only able to make a vague acknowledgement and say he was “ready to consult”.
“Without the tax advantages, it would be a non-starter,” Louis Degabriele and Conrad Portanier agreed.
Prospects is the result of almost 18 months of work, which started with a survey of local SMEs to determine demand, MSE head of business and product development Cliff Pace explained. As a result the Exchange came up with a cost-effective framework aimed at companies that want to raise up to €5 million, with around €1 million being the lower end at which it will still be feasible.
The listings will not be approved or regulated by the Malta Financial Services Authority, but rather by the Malta Stock Exchange, and the onus for due diligence will be placed on a corporate adviser, who would follow the process through from before the listing to afterwards. The corporate adviser can be either an individual or legal person, but will be required to offer taxation, legal, accounting and brokering service, either in-house or outsourced.
Mr Portelli said that the MSE would only charge €5,000 for listing through Prospects – compared to around €115,000 on the main market. Mr Pace added that it was anticipated that the adviser would charge between €25,000 and €35,000, something that was met with scepticism by practitioners who said the liability alone would deter them from taking clients on for that fee.
The onus for due diligence will be placed on a corporate adviser, who would follow the process through from before the listing to afterwards
Mr Portelli, however, was hardly sympathetic saying that the practitioners would make enough money out of the service, particularly if they were able to get multiple clients.
“If we can keep the listing costs to €50,000, Malta will be less expensive than Ireland – but more expensive than Poland. This is a competitive market. We have to compete if we want to attract international companies,” he said, adding that they anticipated more demand from overseas than from local companies, given the size of the local market.
Given the responsibility that will have to be borne by the corporate advisers in a sector which rarely requires much governance, getting the right people or companies on the approved list of advisers will be paramount.
The MSE is setting up a Prospects Admissions Committee and will publish a list of approved advisers, who can be in Malta or overseas, depending on where the SME itself is based.
The listing will also be much quicker, with the Exchange aiming for one month from start to finish. Companies will only need to present a business plan, rather than a full-blown prospectus, and there are numerous other advantages with regards to capital requirements, for example. The rules for Prospects run to over 100 pages, which include clear guidelines for protection of investors in this riskier market.
A new website for Prospects, smeprospects.com, is being launched, while the MSE will be updating its own website with the tagline ‘Gateway to Europe’. Prospects requires a change in legislation to allow the MSE to regulate the listings, which will be passed through Parliament soon, Minister Scicluna confirmed.