Eric Forest: “The stock market is neither too complex nor too demanding for SMEs”
In May 2013, NYSE Euronext announced the launch of EnterNext, the new pan-European marketplace dedicated to SMEs.
CEO Eric Forest takes a look at the specific needs of this category of companies and at EnterNext’s goals.
What is the role of EnterNext?
EnterNext was created with the purpose of helping small and medium-sized companies (SMEs) find alternative sources of financing. Our role is to assist companies listed on compartments B and C of Euronext or on Alternext – companies with a market valuation of less than one billion euros – to make better use of the market, as well as to help unlisted companies prepare for possible entry on the stock exchange. It is also crucial to promote these companies among investors, and more generally to activate the entire ecosystem in seeking solutions to the challenges of financing their growth.
What are the specific needs of SMEs with regard to the stock exchange?
SMEs today need alternatives to bank loan financing. Loans have become harder to obtain with the recession and new bank equity regulations which allows the stock market to reassert its role. The market environment is also more favourable today. The launch of the SME stock savings account (the French Plan d’épargne en actions dedicated to SMEs), for example, will “fuel” our market by drawing more savings to investment in small and medium-sized companies, enabling these to strengthen their equity.
What are your goals?
We target the listing of 80 new companies per year in the four Euronext markets (Paris, Brussels, Amsterdam and Lisbon) by 2016. In 2013 there were 26 new entries in the market. This reflects an upward trend from the 16 new listings in 2012. It is important to point out the acceleration of this trend, with half of these operations completed in the final quarter of the year. Our second goal is to significantly increase the volume of funds raised in equity and bonds for the companies that form our target group. And most broadly, we aim to position the stock market as a source of financing for SMEs.
What obstacles do you anticipate?
We must fight preconceptions and recall to mind a few truths by explaining things clearly and educating company executives. No, turning to the stock exchange is neither too complex nor too demanding. You have to learn to use it. No, smaller securities are not at a disadvantage in terms of performance, on the contrary! While the French CAC 40 index has risen 24% in ten years, the CAC Mid & Small index has registered growth of 130%. And no, issues of liquidity of smaller stocks should not be seen as inevitable. Liquidity must be understood as the ability for an investor to enter or exit the market at the desired moment. Company executives therefore have a role to play: the company must interest and be interested in the market over the long term, which is achieved through active marketing of its security.
Mentalities are changing, and one very encouraging point of note is the return of institutional and individual investors to small and medium-sized stocks. This is apparent in the success of the latest operations on our markets, which generated a level of demand such as we have not seen for several years.