Italy under pressure to boost appeal of Milan stock exchange

Italy must do more to attract companies to the Milan stock exchange after the bourse lost some of its biggest names this year, including the holding group for the billionaire Agnelli family and luxury shoemaker Tod’s, industry experts have warned.

Exor, the investment vehicle for the Agnelli’s, and luxury shoemaker Tod’s are among almost two dozen groups that have delisted from Borsa Italiana this year or have announced plans to do so, cutting the overall market capitalisation of companies on the exchange.

While Exor, Tod’s and Atlantia, Italy’s biggest infrastructure group and another high-profile departure, each had specific reasons for leaving, analysts say that a combination of complex listing rules and falling share prices have put Borsa Italiana at a disadvantage compared with larger exchanges.

“The broader issue is that many companies find the Milan stock exchange increasingly less attractive compared to other countries,” said Giancarlo Giudici, a corporate finance professor at the Politecnico di Milano School of Management.

“It’s a matter of having to deal with domestic regulators, the requirements are complex as are the procedures,” he added.

The FTSE MIB index, Italy’s flagship stock market index, has fallen roughly 20 per cent this year, underperforming other main European indices.

This year the Italian finance ministry sought to revise the rules governing initial public offerings in an attempt to boost listings. In August, for example, a stipulation requiring that all IPO prospectuses be translated into Italian was ditched, streamlining the process of going public.

Nor has Borsa Italiana, which the London Stock Exchange sold to Euronext for €4.3bn in 2020, been without its successes this year. It has attracted 20 companies, with Technoprobe, a maker of testing equipment for semiconductors, the biggest newcomer with a market value of €4.4bn.

While it lacks any significant tech companies, the exchange is home to several luxury groups, reflecting their standing in the domestic economy.

Moncler, Brunello Cucinelli and Salvatore Ferragamo are all listed on Borsa Italiana, while Prada is exploring a secondary listing in Milan. Renzo Rosso’s Only The Brave group, home to brands such as Marni, Diesel and Jil Sander, is also looking at going public in Milan by 2024.

Guglielmo Manetti, the chief executive of Milan-based investment bank Intermonte, said that, although Borsa Italiana has appeal for medium-sized companies, more radical changes are required to draw larger ones.

Italy does not, for example, allow shares with more voting rights, as several other markets do. “This is a feature that has attracted large Italian companies, such as Exor, to delist from Milan stock exchange and move to the Dutch stock exchange,” said Manetti.

Fabrizio Testa, Borsa Italiana chief executive, acknowledged that “we must continue to change processes, rules and laws to respond to the needs of entrepreneurs”.

“The task force co-ordinated by the Italian Treasury has reached unanimous consensus on the necessity of taking action for the simplification of rules,” he told the Financial Times.

Borsa Italiana is currently awaiting the domestic regulator’s green light to implement changes to its listing rules.

The bulk of the companies on Borsa Italiana are small and medium-sized ones. “Italy is a country of SMEs,” said Testa, adding that parts of the Milan stock market “represent the excellence of the Italian entrepreneurial system” and show “the value of the Italian market expressed at its best”.

But the exchange faces growing competition from the private equity industry and other investment firms for small and medium sized companies.

During the past couple of years, buyout firm Investindustrial has taken over packaging group Guala Closures and tomato sauce producer La Doria. Just last month, Prima Industrie, a laser manufacturer, was acquired by Alpha Partners and Peninsula Capital Partners. All three companies were previously listed on Borsa Italiana.

“The average multiple for private equity buyouts is 11 or 12 times the ebitda, which compares to an eight or nine times multiple on Borsa Italiana,” said Manetti.

Investment by both buyout and venture capital firms more than doubled in the first half of the year from the same period in 2021, according to a report published this month by Aifi, the Italian sector’s lobby group, and accountants PwC.

Acknowledging the threats, Testa said that “we have started a process of reform of the stock market rules that must continue”.


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