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The IEX - a success story for the ISE Back  
Since its launch over two years ago, the Irish Enterprise Exchange (IEX) has swelled to include 30 firms, while also forging a strong bond with its English counterpart the Alternative Investment Market (AIM). Des Carville and Stephen Barry chart this success and describe the benefits of listing on the IEX.
It is now some two and a half years since the Irish Enterprise Exchange (IEX), the Irish equivalent of the London Stock Exchange’s Alternative Investment Market (AIM) was launched. At the time of launch there were eight member companies which had transferred from the Developing Companies Market and Exploration Securities Market. While, at the time, some market commentators questioned the rationale behind the introduction of IEX, its evolution over the last 30 months speaks for itself – at the time of writing there are now 30 companies listed on IEX, with a combined market capitalisation of approximately E3.3 billion.

Given the London Stock Exchange’s (LSE) position as one of the premier capital markets in the world, it was never going to be easy to replicate the success that its junior market, AIM, had enjoyed since its launch in 1995. However, it is clear that the introduction of IEX has provided an outlet for small and medium sized Irish companies seeking institutional investment. While previously small and medium sized Irish IPO candidates were shunning the Irish market in favour of AIM, the IEX has provided a credible opportunity for Irish companies to list their shares and have them traded in Ireland.

The success of IEX lies in the fact that the Irish Stock Exchange (ISE) did not seek to reinvent the wheel on its introduction – by adopting an admission process and a set of rules that was complementary to those of AIM, the ISE immediately made the IEX market an attractive option for Irish IPO candidates, the majority of whom now seek a dual listing on both IEX and AIM. The only meaningful difference between the two markets is that, to join IEX, a given company must have a minimum market capitalisation of E5 million.

The availability of this dual listing is attractive in itself as, apart from increased media visibility and ongoing institutional and research support, it ensures that IEX listed corporates can have their shares traded in both sterling (on AIM) and euro (on IEX) – an important advantage when one considers that many of the investment funds active in AIM and IEX stocks are only permitted to invest in one currency or the other. An additional benefit to an IEX listing is that, in certain circumstances, companies are eligible for inclusion in the ISEQ Index – which increases their visibility even further versus ‘AIM-only’ stocks, as, at a minimum, ISEQ Index tracker funds will likely have to take a position in the stock.

IEX v the Official List
While an IEX and AIM listing are complementary, relative to the constituents of the ISE’s senior market - the Pfficial List - IEX companies enjoy a significant advantage due to IEX’s regulatory regime. IEX’s ‘lighter touch’ regulatory regime, while still ensuring transparency and accountability, does allow smaller companies the flexibility necessary to facilitate growth. From admission criteria through to continuing obligations, the IEX rules are deliberately less onerous that those of the ISE’s Official List, where much larger companies such as Ryanair and Bank Of Ireland are more at home.

The principal differences between an IEX quotation and a listing on the ISE’s Official List relate to admission criteria, though there is more flexibility in IEX’s continuing obligations regime also. For example, a minimum three year trading record is required for prospective Official List companies while no such requirement exists for IEX companies – thus allowing smaller companies access to the capital markets earlier in their development. In relation to continuing obligations, once on the market, Official List companies require prior shareholder approval for substantial acquisitions and disposals. IEX companies only require shareholder approval for these types of transactions in certain limited circumstances (e.g. a reverse takeover) thus affording significant scope to develop by way of acquisition, without the requirement to invest significant amounts of resources obtaining shareholder approval.

IEX growth
Eight new companies have listed on IEX in 2007, including Origin Enterprises (which was demerged out of IAWS plc), TVC Holdings and Niall McFadden’s investment vehicle, Boundary Capital. While the share prices of some of these companies continue to exhibit volatility, in line with the recent market turbulence affecting many Irish plcs, the success of Origin Enterprises underlines the attractiveness of the IEX market. Demerged out of IAWS plc, Origin is a collection of businesses from the agri-nutrition sector together with a significant property portfolio. On admission to IEX in June of this year the company raised E100m and, following a relatively good run since this time has a market capitalisation in excess of E500 million. Traditionally, companies such as these would possibly have listed on AIM only but the introduction of the IEX has provided a viable alternative. And the IEX is not merely a listing – it has provided a viable trading platform also – since its IPO, 53 per cent of all trading in Origin shares has been done through the Irish market.

IEX is also a cross-sectoral market, as illustrated by the companies joining the market over the last 12 months. Companies from sectors as diverse as venture capital (TVC holdings), technology/software (First Derivatives), agri-nutrition (Origin Enterprises), infrastructure services (SiteServ), resource exploration (Petroneft) and food distribution (Total Produce) have all joined IEX in the last 12 months. This is in addition to several other sectors which were already represented such as property (Blackrock), bio-pharmaceutical (AGI Therapeutics), recruitment (CPL Resources) and business support services (Newcourt and Veris).

Given the growth IEX has experienced since launch it might be expected that the stream of companies ready to join the market might begin to slow to a trickle. On the contrary, however, it is expected that this market will continue to grow. In addition to a healthy number of growing Irish companies with an appetite for capital and liquidity, there are a number of Irish companies which are currently listed on AIM that have not taken advantage of the opportunity that a dual listing on IEX provides. While companies such as Petroceltic International and Finance Ireland, which were previously only quoted on AIM, have added an IEX listing there is a reasonable expectation that several of the remaining ‘AIM-only’ Irish companies may follow suit. The designated markets route to an IEX listing is designed to facilitate companies that are already listed on certain exchanges (the so called ‘designated markets’) to list on IEX in a straightforward manner, eschewing several of the steps required of a company obtaining such a listing for the first time. While AIM is one of these markets, the ISE’s Official List is another that has seen some of its members move across to the IEX. Prime Active Capital (previously Oakhill) and Fyffes are two of the more recent examples.

It is clear that the introduction of IEX met a need within the Irish small and medium sized business community that existed at the time. Whether the IEX will continue to grow its membership at such an impressive rate remains to be seen but the market has certainly been, to date, a great success story for the ISE.

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