Finance giants lobby for JOBS-style reforms to EU IPO laws

A consortium of financial trade groups has begun lobbying the European Commission to implement the sort of changes that triggered the U.S. biotech IPO boom. The European IPO Task Force specifically wants politicians to slash the regulatory and administrative cost of going public by up to 50%, a move that would make it financially feasible for more small companies to float.

EuropeanIssuers, the European Private Equity and Venture Capital Association and the Federation of European Securities Exchanges (FESE)--which collectively make up European IPO Task Force--have identified cost as one of the main deterrents to going public. FESE, which represents 36 financial exchanges, estimates that up to 10% of an IPO that raises less than €50 million ($55 million) is swallowed up by fees. Tiny IPOs of €6 million or less are hit even harder, with up to 15% of the amount raised in such listings going toward costs.

The trade groups want these costs to come down, particularly for small, fast-growth companies such as biotechs. FESE and its collaborators argue the current legislation is designed around the top 10% of companies, making it wildly inappropriate for small, pre-revenue biotechs. While pushing for a 50% across-the-board cut in the cost of going public, the European IPO Task Force is also arguing that legislators should spare small companies from certain requirements. The inspiration for the plan comes from the U.S. Jumpstart Our Business Startups (JOBS) Act.

Once the JOBS Act shielded companies with less than $1 billion in revenue from a set of compliance requirements, biotech IPOs went on a tear that has continued pretty much unabated to this day. Trying to translate the approach to Europe will throw up some challenges unique to the continent. Significant country-to-country variation across the continent means defining the European-equivalent of the "emerging growth companies" at the heart of the JOBS Act could prove problematic. And it is unclear whether there is widespread appetite for such changes within the European Commission.

Politicians are reconsidering their approach to capital markets, though. And Belgian Member of the European Parliament Philippe de Backer--who also heads up the European IPO Task Force--is pushing his peers to look hard at the report. "Although Europe continues to build and grow businesses with the potential to be world class the failure of the IPO market to facilitate their access to capital hampers their growth and ultimately their potential to create jobs," De Backer said in a statement.

- read the report (PDF)
- and the press release (PDF)

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