Unfortunately, EU action through the listing act aimed at incentivising businesses and companies to go public and for individual, non-professional investors to invest in these companies, did not achieve its targets. BETTER FINANCE’s findings rely on two sets of observations from the market: first, the long-term trend of decreasing initial public offerings (IPOs) on regulated markets and multilateral trading facilities in the EU, and second, the decreasing (or stagnating, but low) level of direct equity ownership amongst EU households.
Already since 2019 BETTER FINANCE has highlighted the issue of limited capital market funding for EU small- and medium-sized enterprises (SMEs), which mostly rely on internal funds or bank lending for their financing needs.
There are three main reasons behind the limited effectiveness of EU policy action in this regard. First, the barriers for many SMEs in terms of compliance costs, second, the absence of an EU equity investing culture amongst EU households, and last but not least, a lack of retail investor trust in capital markets.