© NYSE Euronext. All Rights Reserved.

Can the stock markets provide the

Business Angels with an exit?

Frédéric de Laminne

NYSE Euronext

21 October 2011

EBAN WINTER UNIVERISTY

ING Brussels 2011

What exit opportunities do the stock markets provide?

• General opinion:

Stock markets are only for the large companies, the “Googles” or

“Facebooks” of this world

• Regulation:

There are more and more constraints and regulations applicable to listed

companies

• Facts:

Many SMEs manage to go public and access the financial markets

2

1 416

3152

89

131116

99

1522 21 1817

14

25

45

24

28

22

10

59

27 1813

5

7

9

49

45 84

12

0

50

100

150

200

250

=> 250 k€=> 500 k€=> 1.000 k€=> 2.000 k€=> 3.000 k€=> 5.000 k€=> 15.000 k€=> 50.000 k€=> 100.000 k€=> 500.000 k€> 500.000 k€

Americas

EMEA

Asia/Oceania

Number of IPOs in the world by nationality of issuer in 2011

3

# IPO

Money

raised

216 issuers raised < 2 m€ in the stock markets in 2011

Source: Dealogic – 01/01/2011 07/10/2011

Explanation: Development of “entry markets”

Main junior markets in Europe

Most stock markets have launched non regulated markets for SME

4

Definitions

Regulated market: A multilateral system managed by a market operator which

brings together buyers and sellers in financial instruments … and functions in

accordance with the Markets in Financial Instruments Directive (MiFID)

• Also called “main market”, “first market”,…

• Examples: LSE, Euronext (merger of Eurolist, Second Market and Euro-NM),…

Multilateral Trading Facility: (“MTF”): a contrario, a market that is not a

regulated market

• 2 categories:

– Alternative trading platforms: Chi-X, Turquoise, BATS, Equiduct,…

– Entry/ junior markets: AIM, Alternext, Free Market,…

• MiFID 2 should create a distinction between these 2 categories

5

6

Development of “entry markets”

Main junior markets in Europe

Exchange Junior Markets

Listed

Companies

31/03/2011

Total Market

Cap (Bn€)

31/03/2011

Avg size

(m€)

London SE /

Borsa Italiana AIM 1.178 93,4 bn€ 79,3

Deutsche Börse Entry Standard 132 11,6 bn€ 87,9

NASDAQ OMX First North 123 3,1 bn€ 25,2

NYSE Euronext NYSE Alternext 158 5,9 bn€ 37,3

NYSE Euronext Free Market 240* 6,2 bn€* 25,8

Warsaw Stock

ExchangeNewConnect 220 1,4 bn€ 6,4

* as of 26/07/2011

Main differences with regulated markets are • lowered admission constraints

• less demanding publication/disclosure requirements

These markets attract much smaller companies

Zoom on the 132 IPOs that took place in Europe in 2011

Only 1/3 of the IPOs took place on the “main markets”

7

Main markets, 69

Warsaw -NewConnect,

74

AIM + London

PLUS, 37

Alternext, 14

Free Market, 5

Frankfurt Entry, 2

Source: Dealogic – 01/01/2011 07/10/2011

Number of IPO per market

Size of IPOs on the European “entry markets”

Many deals are very small but issuers get access to the markets

8

-

4

8

12

16

20

- 10 20 30 40 50

Market cap (m€)

Money raised (m€)

Source: Dealogic – 01/01/2011 07/10/2011

Population: IPOs on entry markets excl. top 10

9

• To raise capital in order to finance growth and reinforce the balance sheet

• To increase their visibility and their credibility

• To provide minority shareholders with an exit possibility

• To provide all shareholders (majoritary, minority, employees,…) with some

liquidity

• To get a permanent valuation of the company (for acquisition, stock option

plans,...)

Why do companies go public?

10

Stock market BA/PE/VC

Access to funding XXX XXX

Liquidity XX X

Visibility XXX X

Credibility XX X

Advice / guidance XXX

Feed-back X XX

Permanent valuation XX

Time / delay - - - - -

Cost - - - -

Comparison with private money

Remark: Correlation between index and money raised

11

Markets are volatile : issuers have to be ready in case the opportunity arises!

MSCI World

Index

!

12

Key messages

1) Stock markets have created ”entry markets” for SMEs

2) Stock markets are not in direct competition with Business Angels:

• There are advantages and drawbacks in both alternatives

• The best choice for a company depends on its maturity

3) Good news for Business Angels: exits can happen sooner (market

conditions permitting!)