Pérez-Llorca and IE Law School held a new session of its Chair on Commercial Law, focused on improving the attractiveness of the Spanish capital market in the context of a decline in the number of listed companies and a reduction in the number of IPOs. The event featured Javier Ruiz del Pozo, Director of the Secondary Markets Department of the CNMV; Jorge Vivancos, Executive Director of Investment Banking at JP Morgan; Christopher McLaughlin, Partner at Arthur Cox; Eduardo Arbizu, Of Counsel at Pérez-Llorca; and Javier Carvajal, Partner at Pérez-Llorca.
Eduardo Arbizu began the session, and after introducing the panellists, presented the conclusions of the ‘OECD Capital Market Review of Spain 2024’. This document notes a structural decline in the number of listed companies in Spain, as well as a significant reduction in the capital raised in initial public offerings (IPOs) and secondary public offerings (SPOs), which between 2018 and 2023 was 65% lower than in the previous 15 years.
In his speech, Arbizu stressed the need to simplify the IPO process and reduce the volatility of the IPO regime to encourage new companies to participate in the market. “It is essential to optimise the tax treatment of trust financing, with the aim of making the market more attractive to both family businesses and private equity and venture capital funds,” he said.
Jorge Vivancos then discussed the three main factors that deter companies from going public. Firstly, he indicated that many companies, especially family-owned companies, fear the loss of shareholder control. “For the founding shareholders, converting part of their stake into cash without losing control is a challenge. In many cases, they prefer to explore alternatives such as selling to another strategic player or to an investment fund rather than opting for an IPO,” Vivancos explained. Secondly, he stressed that being listed on the stock exchange allows for quicker access to capital, which can be an advantage, although companies must be prepared to deal with the volatility and demands of the financial market. “Access to large funds and expanded liquidity is an obvious benefit, but it means meeting strict regulatory and transparency requirements,” he said. Lastly, Vivancos highlighted value arbitrage in companies with complex corporate structures. “When a listed company has a subsidiary with a different business than its core business, the market may not adequately reflect its value. In such cases, shareholders may perceive that the stock market does not provide a fair valuation for certain business lines, which influences the decision to list,” he concluded.
Javier Carvajal went on to stress that, in the case of family businesses, concerns about maintaining control remain an obstacle. “There is concern among the owners about the ability to continue running the company without retaining control. This is a recurring debate before deciding to go public,” said the Pérez-Llorca partner.
Carvajal also pointed out that the complexity and length of the IPO and listing processes can act as disincentives: “Paradoxically, being a listed company can make the process of acquiring or selling relevant shareholdings slower and more costly, which, in some cases, makes delisting a lengthy and extremely burdensome process.” In his view, it is crucial to work on both the entry and exit routes to the stock market in order to make it more efficient and attractive.
Carvajal also questioned the effectiveness of the so-called ‘loyalty shares’ recently introduced in Spanish law. “They were presented as a solution to improve market competitiveness, but the results have not been as expected. Instead of implementing partial measures, we should rethink the principle of proportionality between voting and economic rights and analyse more effective alternatives,” he argued.
Javier Ruiz del Pozo addressed the regulatory challenges facing the capital markets, highlighting excessive regulation as one of the most recurrent complaints among issuers and investors. “They tell us that there are too many regulations, governance and disclosure requirements. While reducing certain obligations can be positive, in many cases the guidelines come from the European Union, which limits our ability to act at the national level,” he explained. In this regard, he mentioned upcoming EU measures to introduce more flexibility, noting “for example, the reduction of the free float required for stock exchange listing or the possibility for new issuers in multilateral trading facilities to have multiple voting share classes.” However, he emphasised that strengthening the capital market in Spain requires, in addition to regulatory adjustments, attracting more institutional investors and improving market liquidity.
Christopher McLaughlin also shared his views on the Irish capital market and the possible lessons applicable to Spain. “We are in a complicated situation in Ireland. What is happening in Spain is not an isolated case; it is a common problem in many markets,” said the Arthur Cox partner. In addition, he explained that Ireland has tried to improve the competitiveness of its market by loosening the listing rules. “A number of obligations have been relaxed in the Dublin and Euronext markets to standardise requirements across jurisdictions,” he said. However, he noted that Irish companies listed on the main market still face significant legal requirements, creating a disparity which makes it difficult to consolidate an attractive market.
McLaughlin also emphasised the importance of the regulatory environment for the competitiveness of the stock market. “It’s not just about the timing of an IPO review, but about a broader framework that encompasses regulation, taxation, corporate law and a specialised judicial system,” he explained. As an example, he mentioned the case of the Netherlands, where, despite a reduction in the number of IPOs in the last 15 years, the market remains more dynamic than in other European countries. “The regulatory environment and market infrastructure play a crucial role in the success of the capital market,” he concluded.
The Pérez-Llorca/IE Chair ended with a question and answer session in which attendees were able to discuss these and other key issues for improving the attractiveness of the capital market in Spain, with a practical and strategic approach for the different players in the sector.
