Recent events at the Irish Stock Exchange have prompted similar reactions to when a local team loses its most valued players. The gloom began last year when one of Ireland’s largest companies, building materials giant CRH, announced a decisive parting of ways with Dublin, as well as the London Stock Exchange, in favour of New York.
Other heavyweights soon followed: Flutter Entertainment delisted in January this year, also moving to the New York Stock Exchange (NYSE), while packaging provider Smurfit Kappa announced similar plans as part of its merger with US company WestRock. Drinks group Diageo called time on its Irish listing last May.
The moves are signals of success rather than any underlying malaise in corporate Ireland
Exodus
The Irish Times estimated the trio of CRH, Flutter and Smurfit to have a combined market value of €74.4bn, or almost half of the €152bn value of the 20 largest companies that trade on the Irish Stock Exchange. It also revealed the Department of Finance had expressed concerns that other corporate stalwarts, such as Kerry, Glanbia and Kingspan, might join the listings exodus.
A collapse in value at the stock exchange would normally presage economic panic. The fact this has not happened signals that, fundamentally, the moves are signals of success rather than any underlying malaise in corporate Ireland.
While Smurfit Kappa CEO Tony Smurfit says that companies such as his ‘want to gravitate towards a market that has much more liquidity and higher ratings’, these home-grown success stories are not planning to forget their roots. All look set to remain Irish entities, headquartered in Dublin, with no diminishment of investment in the country.
More than 20 companies have left Euronext Dublin since 2018, with only five joining
Pipeline
The Irish Stock Exchange, which has been part of the Euronext Group since 2018, isn’t entirely unfamiliar with its top performers seeking out deeper pools of capital elsewhere. Companies such as Greencore, Aryzta and Grafton have all followed similar paths in previous years.
Euronext Dublin CEO Daryl Byrne recognised in an interview that ‘companies are always going to leave for various reasons, but actually you just need that pipeline of companies coming through’.
But there are signs that the pipeline is drying up. Analysts estimate that four to five new entrants would be needed every year to keep Euronext Dublin viable. However, new listings activity in the form of initial public offerings (IPOs) has slowed to a crawl. According to the Business Post, more than 20 companies have left Euronext Dublin since 2018, with only five joining.
To address this, Euronext Dublin actively supports next generation companies through its IPO Ready programme. As of 2023, there were 14 participant firms, in most cases stuck in the departure lounge as they await more favourable winds.
‘EU solutions will need to be found to address the common challenges’
Euronext Dublin also claims to be the Euronext Group’s ‘centre of excellence for debt and funds listings’, a position linked to Ireland’s position as Europe’s largest domicile for exchange-traded funds. This feather in the cap notwithstanding, Dublin is the second smallest member of the seven-strong Euronext Group.
Common challenge
The minister for finance, Michael McGrath, has argued that the issues facing Euronext Dublin are not unique to Ireland. He says: ‘EU solutions will need to be found to address the common challenges faced by EU exchanges.’
A comprehensive Europe-wide response may be in the offing as the EU has announced a series of measures that it says will make it easier for companies of all sizes, including SMEs, to list on European stock exchanges.
Europe (unlike Ireland) offers specific support for its equity capital markets and IPO incentivisation
However, Byrne argues there is at least one area where targeted action by the Irish government could be taken: the 1% stamp duty on share trading. This, he says, compares unfavourably to the tax-free trades possible in the US and many European jurisdictions. ‘It’s bizarre… when you look across Europe, it’s just not compatible,’ he told the Financial Times.
Level playing field
A recent Grant Thornton report assesses the challenges facing the Irish Stock Exchange and sets out a three-point proposal for it to move forward (see box).
It identifies Ireland as lagging in two strategic areas: Europe (unlike Ireland) offers specific support for its equity capital markets and IPO incentivisation, and does not tax trades (or does so at a considerably lower rate than in Ireland).
The report also illustrates how some countries have brought different but vigorous approaches to energising their stock exchanges. Norway, for example, has targeted the ESG, energy and infrastructure sectors for the coming years, and encourages use of Euronext Growth exchange as a stepping stone to the main Euronext Oslo market.
‘Equity markets can contribute significantly toward employment, growth and tax revenue’
Meanwhile Sweden has introduced new rules and processes to allow US issuers to list in Sweden while remaining compliant with US securities law. It also encourages a strong, family-backed private equity culture that benefits early-stage companies and engenders loyalty to Swedish equity markets.
Both Scandinavian countries also support an active ecosystem with a large number of investment banks and houses.
Future trends
As Grant Thornton’s report states, ‘equity markets can contribute significantly toward employment, economic growth and government tax revenue’. Stamp duty on shares brought in €500m for the Irish exchequer in 2022.
European stock exchanges may have lost the battle to Wall Street in terms of hosting the biggest global companies, but they play a vital role in turning successful SMEs into something bigger. The issues facing the Irish Stock Exchange are undoubtedly critical both for its own survival and the future of corporate Ireland.
Revival recommendations
- Establish a bespoke cornerstone investor/fund to support IPOs, with a specific emphasis on projects of strategic national importance to address the current lack of domestic institutional capital.
- Introduce a stocks and shares tax-free savings scheme like the UK’s ISA scheme along with a venture capital trust regime to increase retail investment.
- Implement targeted capital gains tax for founders/owners to increase the attractiveness of fundraising via public markets to support business growth.
Source: Grant Thornton
