Battered by the tech downturn, beset by governance disputes - it's been a rough year for Europe's major high-growth equity markets
Neuer Markt
This is the grandaddy of them all, and it's been a dramatic year for the junior market set up in March 1997 by the Deutsche Borse. Home to around 340 companies, Neuer Markt boasted stellar performance throughout the dot-com boom, but that is now but a memory as the Nemax index plummeted during the last year. Retail investors got their fingers burned and the recriminations started to fly. The market was poorly regulated, the critics claimed, disclosure lacking and governance weak. Stung by these accusations, the Deutsche Borse sprang into action, issuing new governance and disclosure rules.
Currently resting at about 75 percent lower than its highs of early last year, Neuer Markt has followed other high-growth exchanges in staging a comeback in recent weeks. But Deutsche Borse's efforts to improve governance have hit hurdles. An attempt to 'name and shame' companies failing to submit their annual reports by an April deadline went badly wrong after five innocent companies were accused of breaking the new rules.
Despite these troubles, Neuer Markt spokesperson Ursula Brita-Schneider insists the market's regulations are among the toughest in Europe. 'We are always looking to make the market more transparent,' she says. She is also unconcerned about the threat posed by exchanges such as Nasdaq Europe and TechMark, both of which are aiming to supplant Neuer Markt as the premier European high-growth stock market. 'They are not really competition. We are already an international growth market.'
TechMark
When the going gets tough, the standards of the LSE markets stand out.' So said Don Cruickshank, chairman of the London Stock Exchange, at the UK's Investor Relations Society conference in March. TechMark prides itself on its tough regulations, which it believes sets it and its 254 issuers apart from its rival European growth markets. 'TechMark offers more liquidity and transparency, plus it's very well regulated,' claims an LSE spokesman.
That's the same message TechMark executives have been taking to continental Europe, where the exchange recently completed a whistle-stop roadshow tour. Adverse market conditions and the fact that TechMark is still less than two years old clearly hasn't discouraged the LSE from aggressively marketing it outside of the UK - a move that has irked some of its rivals. 'You could say we're in people's backyards. This is a reasonably aggressive marketing push, but it's what you have to do if you want the market to internationalize,' adds the LSE source.
Nuovo Mercato
Italy's Nuovo Mercato may be smaller than its neighboring high-growth markets, but that doesn't mean it's been any less exciting. Launched in 1999 and home to 42 companies, the market is dominated by two stocks which account for 40 percent of total capitalization - internet group Tiscali and telco e.Biscom.
Investors in Nuovo Mercato hopped aboard for a wild ride early last year before crashing back to earth, falling 76 percent from its highs of early 2000 by year-end.
The recent launch of Star, the Borsa Italiana's new market segment aimed at small and medium companies, should provide some internal competition for the Nuovo Mercato, which has also been hit by corruption claims in recent months. Allegations of fraud leveled at internet television company Freedomland were a major blow to the market. Additionally, market regulator Consob has announced plans to strengthen regulation of the Nuovo Mercato, and has ruthlessly screened IPO candidates seeking to join the market.
Nouveau Marche/Euronext
By launching in early 1996, Nouveau Marché gave itself a head start over its more recent rivals. But age does not necessarily guarantee success. Hamstrung from the outset by a shortage of IPO candidates in its own backyard, Nouveau Marche has struggled against internal competition from the other segments on the French exchange: Premier Marche and Second Marche. Larger issuers such as ISPs Wanadoo and Liberty Surf opted for a Premier Marché listing while the Second Marche cleaned up many mid-cap issuers who may have otherwise plumped for Nouveau Marché. Too often, France's high-growth market suffered as it continually found itself below its larger siblings in the stock market IPO pecking order.
But all this should change as the Euronext merger, announced last year, starts to take effect. Under current plans the Nouveau Marché will integrate with the small Amsterdam Nieuwe Markt and the tiny Euro.NM in Brussels. 'The idea is to merge the three markets into one, operating the same market and listing rules but in three different legal jurisdictions,' explains Dominique Leblanc, general manager of the Nouveau Marché's listing department in Paris.
In response to governance and disclosure concerns, Euronext is launching a 'quality segment' targeted at TMT companies. Called Next Economy, it will be reserved for stocks that meet stringent listing requirements, including extra disclosure and governance requirements. Referring to the higher standards of Next Economy, Leblanc adds, 'Some companies can do it, others can't - that's why we have the optional quality segment.'
Easdaq/Nasdaq Europe
The newest of the new exchanges, Nasdaq Europe was born earlier this year when Nasdaq took control of Easdaq, the pan-European exchange. The fact that Easdaq, launched in 1996, based its structure on Nasdaq in the US should provide useful synergies through the integration process.
However, Easdaq quickly found that even in the tech-fed buoyant IPO market of the late 1990s the appetite for pan-European offerings remained limited, attracting only 59 companies to its board in five years. This is clearly something Nasdaq plans to change. 'Nasdaq will invest assets and expertise into this market to build it into a pre-eminent European market, and a key hub to our global platform,' comments Fiona Macrae, marketing specialist at Nasdaq's London office.
The plan is to integrate Nasdaq Europe into a global, round-the-clock trading network, encompassing Nasdaq's operations in Asia and North America. 'We are committed to building a globally-linked equity market in Europe,' Macrae adds, pointing out that this does not preclude Nasdaq from establishing more partnerships with other leading platforms. The acquisition of Easdaq by Nasdaq provoked some unsympathetic press coverage in Europe, with many commentators suggesting that Nasdaq only turned to Easdaq when the London Stock Exchange rebuffed its advances.
Nasdaq hasn't been slow off the block in implementing reforms. At time of press it was preparing to launch its European Trading System (ETS), and Macrae confirms that revised listing standards and rules will be published 'in the near future.'