The Benefits of the Emerging Companies Market (ECM)

1. Background

The Emerging Companies Market (ECM) is the unregulated market of the Cyprus Stock Exchange (CSE). The ECM’s concept is similar to the Alternative Investments Market (AIM) of the London Stock Exchange (LSE). Companies which are wishing to list their securities such as shares and bonds on the ECM are not required to comply with the mandatory provisions of regulated markets with respect to both listing requirements, such as size, number of shareholders/spread and continuous obligations.

The CSE, through the ECM, allows not only public companies to list their shares but allows both private and public companies to list their bonds. This market offers a diversified opportunity mainly to small and medium-sized enterprises to get listed on the CSE and expand their growth potential. The simplified regulated environment of the ECM has been designed to address the needs of unlisted companies seeking finance and easy access to a secondary market, thus improving the liquidity of their shares, and offering an exit route to existing or future investors.

2. Advantages of the ECM

Some of the advantages of admission of a company to the ECM are:

• A vehicle for raising capital: The CSE provides the listed companies with alternative means for raising the capital required, in order to finance their development and growth activities.
• Strengthening of the company: By obtaining a listing, local and foreign companies can gain strength and reach the minimum size required in order to be able to become competitive in the globalise environment.
• Enhanced corporate image: Listed companies enjoy the privilege of attracting publicity, with all the positive implications associated with it. Furthermore, obtaining a listing has a status factor, which often enables listed companies to obtain finance on better terms than a private company.
• Greater Marketability: Investors who choose to invest in listed companies may liquidate their investments at any time, an advantage that cannot be enjoyed when investing in private companies.
• Tax Benefits of Investors: In some cases there are a lot of tax benefits of an Investor to buy and sell at a profit listed securities than non-listed ones.
• A path to mergers and acquisitions: It is much easier for listed companies to proceed with a merger and acquisition, of either a company listed on CSE or a foreign company, and enjoy the synergy from such an option. The reason for this is the regulated market demands transparency to the economic affairs of each listed company.
• Opportunity to invest abroad: Following the liberalisation of interest rates and the removal of restrictions in capital flows, listed companies will be able to utilise the funds raised through the Cyprus Stock Exchange in order to invest abroad in countries where finance is difficult to obtain, but where prospects are promising. In the same way, companies from abroad will be given the chance to invest in local companies, and naturally, listed companies will enjoy the lion’s share in foreign investment.

3. The role of the Nominated Advisor

A key requirement of the ECM is the need of the public company to obtain the services of an approved Nominated Advisor (NOMAD), who ensures that the company is appropriate to be quoted on the ECM and to assure that the rules and regulations are complied on an ongoing basis. In addition, the NOMAD will assist the company throughout the flotation process. The NOMAD must be retained at all times to consult the listed company.

4. Conclusion

Since its launch, the ECM has transformed from a market primarily focusing on small domestic companies, to an international market eager to welcome companies from around the world. Notwithstanding the continuously evolving legal framework, it remains a flexible and lightly regulated market. There are great opportunities for small and emerging companies wishing to be listed on the ECM.

5. How LLPO can assist you

LLPO is a CSE approved NOMAD. We have a strong and distinct, regulatory-compliant brand which, we feel, lends weight to any prospective listing in the eyes of both the CSE ECM team and potential investors. Furthermore, we can assist and advice your company with all the steps that are required for the listing of the company to the ECM as well as all the continuous obligation the company needs to adhere following its admission.