Irish Stock Exchange chief executive Deirdre Somers has said the Government needs to consider ways of incentivising young companies here to go public, rather than selling out to trade players, as they seek to scale up their businesses.
Ms Somers has also told The Irish Times the Government should consider listing State assets on the stock market rather than selling them via auctions or trade sales.
Ms Somers said changes to our tax code and a stated Government policy to support the scaling of Irish enterprise were urgently needed to produce the next generation of Irish listed companies to take up the torch from the likes of Kerry Group, Paddy Power and Ryanair.
Action plan
She called for the Government to establish a “dedicated group to address the IPO [initial public offering] challenge” as part of its action plan for jobs.
Ms Somers said an IPO task force was established in the US to find ways to stimulate activity and its findings were implemented by President Barack Obama in the recent jobs act.
Ms Somers cited the tax treatment of share options as one area that needs to be reviewed: “Why is it that our tax policy incentivises entrepreneurs to exit their businesses before global scale can be achieved? Is there any reason why we should not be saying that Ireland will have five new companies with a market capitalisation of over €1 billion in the next five years?
“Why is it that our tax policy does not reward risk and instead incentivises entrepreneurs to exit their businesses before global scale can be achieved?”
She said more than 90 per cent of employment growth in companies takes place after an IPO. Encouraging businesses to list on the stock market here rather than sell to overseas buyers would be more beneficial for the economy in the long term, Ms Somers added.
Economic multiplier
“These indigenous companies are more embedded than any foreign multinational would ever be, delivering an economic multiplier and dividend to Ireland for decades to come,” she said.
“The next generation of successful, scalable businesses is not coming through and this should be a major wake-up call for the Government.”
The number of companies listed on the Irish Stock Exchange has fallen from 76 to 52 over the past decade.
In the past year, United Drug and Greencore quit Dublin for listings in London while CRH, the largest company on the Irish market, moved its primary listing to the FTSE index.
Ms Somers said fewer IPOs have been a feature for all stock exchanges since 2007, due to the global downturn. She said 44 per cent of companies had left markets in the US while 35 per cent had left Aim, the UK’s biggest secondary market.
She said 50 companies listed on the market in the 1980s, when Ireland was also gripped by recession. “Markets are cyclical and when this changes we need to be ready,” she said.
Market turnaround
“That means having companies that can benefit from the market turnaround. However, even State agencies accept that almost all Irish high-potential companies will be sold. This is an issue that Ireland needs to address.”
She said Irish companies WebRez, Cartrawler, Airtricity, Fintrax, Curam and Pallas Foods had “compelling [stock] market prospects” but instead were sold to trade buyers.
Ms Somers called on the Government to consider IPOs for some of the State assets it is preparing to sell, in particular Bord Gáis Energy.
“Why is it that in any other developed economy a [stock] market-based approach to the disposal of state assets would be a preferred option, enabling the state and its taxpayers to crystallise value but retain some of the upside potential for taxpayers – but not in Ireland?”
