An EU-wide market for initial public offerings, or IPOs, and other issuances is vital to allow a Capital Markets Union to emerge. That’s why the latest draft prospectus Regulation, published on 30 November 2015, goes somewhat further than the European Commission has previously entertained, but it still does not create a European market. The Commission is hostage to its own (or member states’) unwillingness to expand the powers of the European Securities and Markets Authority (ESMA) to become an EU-wide prospectus authority.
The main novelty of the new draft is that, unlike the previous regimes, it is a regulation, and hence directly applicable across all member states, and it also introduces two new regimes: no prospectus for offers of securities with a total consideration below €500.000 and an exemption of up to €10 million for SMEs. Hence, rather than unifying markets, it further fragments them. The draft also does not apply to issues below €500.000, to offers of securities addressed to qualified investors and to offers of (debt) securities for a total consideration of at least €100.000 per tranche.
Another element hindering the formation of the Capital Markets Union is the notification procedure. As presently drafted, an issuer for a pan-European IPO could potentially have to notify up to 30 countries, and eventually translate the summary of the prospectuses into as many languages. The prospectus approved by the home member state should be valid for the offer to the public or the admission to trading in any member of host member states, provided that ESMA and the competent authority of each host member state are notified. Within the context of the CMU, this entire process should be simplified. Only a notification to ESMA should be proposed, and should be considered sufficient for an offer to have EU-wide validity.
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