C 235/14 EN 27.7.98Official Journal of the European Communities1.4. A further criticism of the communication is that the speedy and full application of existing EuropeanUnion legislation would help. Finally, in the field of it fails to make clear that the new European capitalmarkets are only of value to companies which, whilst institutional investment and the free movement of capital,theCommissionmaintainsthatfailuretoremovetechnically SMEs (under 250 employees, less than ECU40 million capital turnover and ECU 27 million on the discriminatory national restrictions could make thetaking of infringement proceedings necessary.balance sheet), are either of medium-size, particularlyinnovativestart-ups,orfirmsthatareparticularlycapitalintensive.3.
Detailed comments on the communication
1.5. In the USA, too, only some 2% of companies atthe most, albeit those with above average prospects for3.1.
growth, attract external funding from informal privateinvestors (‘Business Angels’) or venture capital funds.TheCommissionestimatesthatthereareperhaps20 000Other than for the comments set out in section 1 of firms at the most in the whole of the European Unionthis opinion, the points made in the introduction arewhichmight go on tohave theirshares traded ona stockaccepted.market at some point. They are, however, the firms thathold the promise of enjoying the highest rates of growthand creating significant new employment, good reasonsfor the Commission to have devoted such a degree of 3.2. Further progress in the development of SMEattentiontotheirfinancingneedswhichhavehistoricallycapital markets in the European Union, and theirbeen less well catered for in Europe than in the USA.prospects.3.2.1. A number of capital markets more attuned tothe needs of innovative and rapidly-growing companiesthan have been traditional stock markets, now exist2.
Summary of the Commission document
in Europe. Two, EASDAQ and EURO.NM, havepan-Europeanambitions.TheLondonAIM(AlternativeInvestment Market) currently appears to be morefocused upon the United Kingdom.2.1. The main objectives of the communication areto explore the potential barriers to the admittance to3.2.2. The growth rates of companies seeking admis-trading on capital markets of the shares of SMEs;sion to these markets is likely to be far in excess of theto start a European-wide debate on the appropriate10% cited in the second paragraph of page 2 of theconditions for access to equity finance; to describe, andCommunication. When comparing sales in 1996 anddrawattentiontotheprogressmadebyvariousinitiatives1997, three-quarters of the companies whose sharesto create new financial markets in the European Uniontraded on the EASDAQ market experienced a growthsuch as ‘EASDAQ’ and ‘Euro-NM’; to outline thein excess of 25%. Nearly a third of all companies onactions the Commission is currently taking and intendsthe market showed a turnover increase of over 100%.to take in the future to overcome the barriers to thedevelopment of SME-orientated capital markets andensure their smooth operation.3.2.3. The long-term success of these markets willdepend on their admitting a sufficient number of innovative companies, as it is these who appear toparticularly excite the interest of investors. Any initia-2.2. The communication identifies two main areastivestoincreasetheirnumbers,particularlyinfieldssuchcreating potential barriers to the development of theseas biotechnology, would make a welcome contribution.capital markets. The first relates to the attitudes,Unfortunately, there is no completely reliable methodcapacities and constraints originating within small andofdeterminingatanearlystagewhicharethecompaniesmedium-sized enterprises themselves. In particular, thethat are likely to grow rapidly and be successful in theattitude ofSMEstowardstheir financing,their expertiselong-term.Whatlargelydeterminestheireventualabilityor lack of it in financial management, and the burdensto attract external investment is the perceived quality of which arranging an introduction on a stock markettheir management.would place on them.3.2.4. Efforts need, therefore, to be concentrated onencouraging more business start-ups and seeing thatthey have access to finance, together with timely advice,2.3. Thesecondgroupofpotentialobstaclesconcern:the cross-border trading of shares on pan-European so improving management quality and reducing thecurrent high rate of mortality, some 50% within thestock markets; particular currency related problems;differences in taxation and national accountancy prac- first five years of existence according to the EuropeanObservatory for Small Business. There are already goodtices;corporategovernanceandinstitutionalinvestment.The Commission believes that in certain of these fields schemes in operation within the EU which can provide