City lawyers involved in the first float on the European Association of Securities Dealers Automated Quotation (Easdaq) stockmarket, the pan-European market for growth companies, are cautious about its prospects.
Charles Martin, a partner at Macfarlanes, which handled the first flotation on the new European exchange for computer anti-virus software company Dr Solomon's, said: “Dr Solomon's driving force was a listing on Nasdaq. The testing time for Easdaq will be in relation to those companies that list only on Easdaq.”
A survey of 100 companies that floated on AIM and the London Stock Exchange, commissioned by Osborne Clarke, found that none had considered a listing on Easdaq, although the exchange had not at that time had its first flotation.
The structure of Easdaq was modelled on the successful North American automated exchange, Nasdaq.
Nick Rogers, corporate finance director at stock broker Beeson Gregory, which has taken shares in Easdaq and is Dr Solomon's London market maker, said although Dr Solomon's main business was in the UK, its competitor companies were listed on Nasdaq.
“Because of that, it could get a better valuation on Nasdaq than it could on the London Stock Exchange,” he explained. “It went onto Easdaq as well because it also wanted to have a European flavour. In other circumstances it might have thought about listing on the London Stock Exchange.”
It is significant that US investment bank Goldman Sachs managed the issue, advised by US firm Sullivan & Cromwell.
The second listing on Easdaq was Belgian biotechnology company Innogenetics, which did have a sole Easdaq listing. Its $89.9m flotation by public offering was more than five times over-subscribed.
Baker & McKenzie's Brussels office and London partner Tom Philipp advised the company. Philipp said it had helped that his firm had both Belgian law capability and previous experience with Nasdaq. He called the new market “yet another step in the internationalisation of securities markets”.
Other lawyers with experience of flotations on the Stock Exchange or AIM are less enthusiastic. Tim Steadman, partner in the smaller companies group at Herbert Smith, said “I'm not quite sure Easdaq has targeted the market right. They appear to be pitching it for companies somewhere in between AIM and the Full List.
“But quite a lot of advisers over here will say either wait until you can get on to the full list, or if you are very keen to go, go onto AIM. On Easdaq it looks like the procedure is going to take longer and it is going to be more expensive.”
Tim Herrington, Clifford Chance financial services head, agrees in part. He said: “I'm not sure there is any logical reason companies should go to Easdaq rather than the London Stock Exchange.” But he added that the market might suit European companies with no clear national base of operations.
Rogers said Easdaq was not targeting AIM-type smaller companies and should be compared to the London Stock Exchange.
He added: “The people who will benefit from Easdaq are those who have a European business but who want to attract US investment. If you are on the official list, money still comes mainly from the domestic market. On Easdaq you get a wider focus.”