(BFM Bourse) – For greater readability, the Paris Stock Exchange is divided into several departments depending on the company’s market size or a company’s desire to be subject to more or less flexible rules. But other spaces, much more confidential, characterize the life of the Parisian stock market.
As regular readers of BFM Bourse, you have become knowledgeable about the Paris Bourse and how it works over time. The editors at BFM Bourse will therefore teach you nothing by explaining to you that Euronext Paris is divided into two main departments. But a booster shot never hurts… On the one hand, we find the most important regulated market in Euronext Paris, where the biggest French companies and companies whose share market weight is a little more modest coexist.
This regulated market is itself subdivided into three sections, classified according to the size of the companies in the listed securities: Euronext section A, which welcomes companies weighing more than one billion euros in capitalization, Euronext section B for companies that capitalize between DKK 150 million and DKK 1 billion. euro and Euronext section C for companies whose capitalization is less than 150 million euros.
At the same time, the stock market operator has created non-regulated market departments: Euronext Growth and Euronext Access, which house companies that want to finance their growth in the financial markets, without going through the traditional department of the regulated market of Euronext Paris …
But do you really know all the branches of Euronext Paris? Recently, the company Boostheat became acquainted with the sanctions department. The stock market operator Euronext had placed the securities of the Lyon group in this department on June 1, according to one of the provisions of the rules applicable to listed companies.
Each listed company is in fact required to comply with periodic information obligations with more or less flexible rules depending on the department in which its securities are admitted to trading. And every year, a handful of issuers take the risk of being slapped by the Autorité des marchés financiers (AMF) and/or the market operator Euronext, which happened to Boostheat.
Indeed, the Lyon-based company had not published the financial elements requested by Euronext within a given time, prompting the exchange operator to act. It was penalized for failure to fulfill periodic obligations, namely failure to publish the annual report, audit report and management report within four months of the end of the financial year.
And if the lagging company does not rectify the situation quickly, a battery of escalating sanctions can be initiated. Initially, Euronext publishes and disseminates the names of companies whose publication is delayed (“naming & shaming”) to inform all market participants and the company itself of this decision. It leads to the transfer of the securities of the lagging company to the sanction department or “penalty bench”.
“We will place the securities in the sanctions department to isolate the defaulting company from other reputable issuers. The aim is to protect market participants,” explains Damien Pelletier, director of admissions at Euronext Paris. Hence the concept of “punishment bench” or putting on the bench in Molière’s language.
This is therefore the first step in the series of Euronext sanctions. If this prohibition is not sufficient, financial sanctions may be imposed depending on the company’s situation. The market operator can also temporarily suspend the listing of the security before stepping up and announcing a possible delisting. AMF can also take legal action to obtain an order from the court to publish under penalty.
This penalty is reversible if the late issuer complies with the rules set by the Euronext market operator. This was the case for Boostheat, which meanwhile managed to publish its 2022 annual report on 21 June. And its securities are again admitted to trading on its original division, namely Euronext Growth.
“The assignment of a security to the Sanctions Department shall cease at the request of the issuer or at the sole initiative of the competent Euronext market operator, provided that the issuer has remedied the default subject to the fulfillment of the conditions required by the competent Euronext market operator regarding the reintegration of the securities in the normal part of the IPO”, recalls the stock market operator.
Among these departments, not known to the general public, we can also cite “Collective Proceedings”, a specific department within which Euronext groups listed companies subject to collective proceedings (protection proceedings, estate proceedings or judicial liquidation). Access to this department of collective proceedings “is not linked to a sanction, but to a judicial decision”, recalls Damien Pelletier.
“The relevant Euronext market operator may decide to list a security in the insolvency proceedings department when the issuer is involved in insolvency proceedings as set out in Council Regulation (EC) No 1346/2000 of 29 May 2000 relating to insolvency proceedings, as in force or an equivalent procedure” , states Euronext.
The AMF recommends that the listed company informs the market about the opening of such a procedure and communicates the provisional schedule as well as any deadline in connection with this collective procedure.
It should be noted that admission to this department does not automatically result in the suspension of trading in securities in the relevant company in the event of collective legal proceedings. And to the extent that “such a suspension was previously in effect, trading would resume from the registration in the insolvency department”, clarifies Euronext.
As for the sanctions department of Euronext, the assignment of a security in the insolvency department ceases at the request of the company concerned or Euronext, provided that the company is no longer involved in insolvency proceedings.
In 2022, 11 companies on Euronext announced insolvency proceedings, compared to only 6 in 2021, Marc Karako, CEO of Park Partners, told Daf-mag.fr. And the specialist expects a sharp increase in the number of insolvency proceedings initiated in 2023 due to the end of state aid in connection with the health crisis.
The professionals’ room
Another space, also little known to the general public, is the playground for very specific profiles. In late 2007, Euronext Paris created a professional department to allow issuers to list their securities on a regulated market without issuing or selling to the public.
This space was originally created to facilitate the listing of foreign companies wishing to acclimatize to the Parisian market. “It is a market suitable for foreign companies looking for additional exposure, celebrity”, says the Euronext Paris specialist. The market values of these companies can lead to them being referred to e.g. in section B of Euronext. However, individuals cannot position themselves directly on these securities.
As the name suggests, it is aimed at so-called qualified investors, i.e. an informed public aware of the risks it incurs by venturing into this very specific department. A natural person can legally request to be registered in a file kept by the Autorité des Marchés Financiers. But it is not “Mister and Mrs. all together” who are authorized to give orders there. The financial watchdog must ensure that the investor has in-depth knowledge of investing in financial instruments, that he has a well-assorted portfolio and/or that he completes a certain number of transactions over a well-defined period of time. .
And what about the companies that are present in this department? This department houses “securities that have been admitted to listing without a public offering, such as SPACs or by direct admission,” specifies Damien Pelletier. According to information from Euronext Paris, six companies are currently listed in this section, of which only one is foreign, namely telecommunications specialist Aerkomm, which arrived in July 2019 via a direct listing. The number of foreign companies developing in this department has been reduced to a small stream, as one of its former residents very recently made the decision to leave the Parisian location.
At the end of June, the Atorum company actually wanted to end its listing on Euronext Paris, taking into account the volumes exchanged and the administrative costs associated with its presence on the Parisian market. However, the company maintains its listing on Nasdaq in the USA. The other five companies listed in this section are SPACs, companies without operational activity that raise funds on the stock market for the sole purpose of making one or more acquisitions. Or companies that went public through a merger with a SPAC.
The companies that have invested in this division are as follows: Teract – which at one point had considered a merger with Casino before withdrawing -, Transition, the first European SPAC dedicated to the energy transition, Dee Tech dedicated to the technology sector, Eureking specialized in the manufacture of biopharmaceutical products and finally Deezer, which this week celebrates its first light as a listed entity. All the companies mentioned all arrived between 2021 and 2022 on Euronext Paris, at the height of the market’s enthusiasm for these investment instruments.
The flexibility of this department lent itself positively to the arrival of the SPACs, because the latter are exempt from the cumbersome and complex process of a traditional IPO. In April 2016, Mediawan’s arrival on Euronext Paris caused a sensation. It was then the first IPO of a SPAC in France and raised 250 million euros on this occasion. Four years later, the production studio created by Pierre-Antoine Capton, Xavier Niel and Matthieu Pigasse was the subject of a takeover bid by its founders.
Without definitively turning your back on the stock market, as was the case for Mediawan, another way is to get out of the professional department. The company can go on the traditional market of Euronext Paris and on this occasion launch a public offer (issuance or sale of securities) with the preparation of a prospectus approved by the AMF. In April 2021, Aerkomm expressed a desire for such a project and wanted to join Section C of Euronext Paris. This project has been a dead letter since…
Sabrina Sadgui – ©2023 BFM Bourse