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NewConnect OPPORTUNITY FOR SME COMPANIES Vienna, 30 June 2016
NewConnect OPPORTUNITY FOR SME COMPANIES
Vienna, 30 June 2016
SMALL AND MEDIUM-SIZED ENTERPRISES IN POLAND
Poland’s economic growth over the last 25 years has been remarkable. In that period, Poland has
more than doubled its income per capita and became a European growth leader at the same
time being the only EU country to avoid a recession in 2009
Small and medium-sized enterprises (SMEs) play an essential role in the Polish and the European
economy. According to latest data published by the Polish Agency for Enterprise Development
(PARP), such companies generate nearly ¾ of Poland’s GDP
According to IBRD’s report „Doing Business in Poland 2015”, micro, small and medium-size
enterprises represent 99% of all economic entities and provide work for 70% of people
employed in non-financial enterprises. /According to the Central Statistical Office of Poland (GUS)
latest data - 99.8% Polish enterprises were small and medium-sized/
Poland is one of the EU member states with the highest entrepreneurship factor. More
than 17% of adults plan to start a business within three years (the EU average is 14%). According
to statistics, while starting a business is no guarantee of success, the average business survival
rate in Poland is not at all low at 76% in the first year and 32% in five years*
These indicators are relevant to investors on alternative markets, including NewConnect,
which list startups and companies with a short track record
*Source: PARP, 2012 data from The Report on the Condition of the Small and Medium-Sized Enterprise Sector in Poland in 2012-2013, PARP, 2014
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SMALL AND MEDIUM-SIZED ENTERPRISES IN POLAND
GROSS VALUE ADDED GENERATED BY OTHER
ENTITIES;
15,6%
TAXES AND CHARGES;
11,4%
LARGE ENTERPRISES;
24,5%
MICRO;
29,7%
SMALL;
7,8%
MEDIUM-SIZED;
11,0%
GROSS VALUE ADDED GENERATED
BY SMALL AND MEDIUM - SIZED ENTERPRISES;
48,5%
GDP contribution of categories of enterprises by number of employees in Poland
Source: PARP, 2012 data from The Report on the Condition of the Small and Medium-Sized Enterprise Sector in Poland in 2012-2013, PARP, 2014
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NEWCONNECT AS A MARKET FOR SMEs BASIC ASSUMPTIONS
SMEs
a great potential for further growth;
a driving force of the Polish economy
strong demand for capital NewConnect
Benefits stemming from the NewConnect market
•Providing solutions for the expansion of high-potential, young and innovative companies
•Attracting individual investors
•Allocating more resources for R&D
•Gaining increased reliability to banks and customers
•Serving as a preparatory step towards the GPW Main List
for SMEs
•Developing companies that account for a substantial part of the GDP
•Strengthening Polish stock market position in the CEE region as an efficient network ofinvestors, companies and clients
for the national economy
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–
–
NEWCONNECT AS A MARKET FOR SMEs BASIC ASSUMPTIONS
NewConnect market has been in operation since 2007
NewConnect was established by the Warsaw Stock Exchange as an alternative trading system (according to MIFID classification MTF) intended for small and medium, dynamically growing enterprises with a clear growth strategy, which need a capital injection between a few hundred thousand and several million zlotys to propel their development
NewConnect is an intermediary step for companies which aim form the regulated market far more demanding in terms of admission requirements and mandatory disclosures
NewConnect operates on the basis of the Act on trading in financial instruments, Regulation of the Minister of Finance on conditions to be met by the alternative trading system, and the Rules of the Alternative Trading System adopted by the GPW management Board
Companies listed on NewConnect market are public companies within the meaning of applicable legal regulations as their shares are subject to obligatory dematerialisation and registration in the National Depository for Securities
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NEWCONNECT – MARKET’S BALANCE
at the end of 2015 - 418 issuers (including 10 foreign) with a total capitalization of more than 2 bln EUR were listed on NewConnect
individual investors are in the lead on NewConnect market as they generate approx. 70% of turnover
NewConnect is noticed by international institutions, including World Bank, FESE, which indicate the Polish market as a good example of an alternative market for small and medium-sized enterprises performing an important role in raising capital for development *
in the development of NewConnect, the GPW has established cooperation with various Polish organizations and institutions (Polish National Chamber of Statutory Auditors, Polish Agency for Enterprise Development, Institute of Accounting and Taxation, Association of Individual Investors)
Newconnect is a path to GPW Main Market for an increasing number of companies – a total of 50 companies leveraged their potential and became listed in the regulated market
*World Bank Report „SME Exchanges in Emerging Market Economies: A Stocktaking of Development Practice”, January 2015; EU IPO Report„Rebuilding IPOs in Europe, Creating jobs and growth in European capital markets” issued by FESE and European Issuers and European Private Equity &Venture Capital Association, March 2015
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NEWCONNECT IN NUMBERS
NewConnect in 2007 – 2015 – KEY DATA
700 3000
600
61 185
24 26 107 26
445 429 431 418 172 351
337 86 89
42 36 32 22 19 84 1 3 8 6 11
24
278
599
1 206
1 992
2 602 2 588
2 141
2500
2 042 500
2000
400
1500
300
1000 200
500 100
0 0
2007 2008 2009 2010 2011 2012 2013 2014 2015
Number of IPOs number of companies at the year's end
number of delistings (including transfers to Main Market) capitalisation at the year's end (EUR mln)
13 companies transfered their listings to GPW Main Market in 2015 7
70
61
39 41
29
6 3
5 10
20
30
40
50
60
>0-<=25% >25-<= 50% >50-<=100% >100%- <=250% >250- <=500% >500- <=1000% >1000%
0
Number of companies
NEWCONNECT IN NUMBERS
Return rate of NewConnect companies, 2015
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NEWCONNECT IN NUMBERS
Amount (EUR mln) and number of dividend payments, 2007-2015
24
84 107
185
351
429 445 431 418
3 9 12 26 39 44 55
66
0,55 0,92
3,91
7,60
12,82
15,35
17,03 18,59
-10,00
-5,00
0,00
5,00
10,00
15,00
20,00
0
100
200
300
400
500
600
700
2007 2008 2009 2010 2011 2012 2013 2014 2015
number of companies at the year's end Number of dividends - total
Value of dividends paid out (EUR mln)
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NEWCONNECT AND OTHER EUROPEAN MTFs - according to FESE data
Number of companies at the end
of 2015 UK
74 34 30 27 23 23 19 21 14
1 044 Poland 418
Euronext 200 Nasdaq 196
Germany 157 embourg 137
Italy Spain
Norway Ireland
Hungary Cyprus Austria Turkey Greece
Lux
UK Germany
Ireland Euronext
Nasdaq Italy
Poland Austria
Spain Norway Luxemb… Cyprus Turkey Greece
Capitalisation at 2015 end (mln
EUR)
99 566 44 101
23 430 13 458
8 589 2 925 2 042 1 922 1 812 1 316 1 119 775 224 118
Turnover in 2015 (mln EUR)
UK Turkey
Euronext Nasdaq
Germany Ireland Norway
Italy Poland Austria
Hungary Luxembourg
Cyprus Greece Spain
42 551 7 462
5 839 4 084 3 965
2 070 987 761 466 26 16 9 1 0 0
Liquidity=Turnover/Capitalisation
2015
Norway 75% Nasdaq 48%
Euronext 43% UK 43%
Italy 26% Poland 23%
Germany 9% Ireland 9% Austria 1%
Luxembourg 1% Greece 0% Spain 0%
Cyprus 0%
Nasdaq
UK
Poland
Euronext
Italy
Spain
Turkey
Romania
Germany
Norway
Ireland
Luxemb…
Austria
Number of IPO in 2015
61 31
19 18 17 17
6 5 4 3
0 0 0
Nasdaq
UK
Italy
Spain
Euronext
Norway
Turkey
Germany
Poland
Ireland
Luxembourg
Austria
Romania
Value of IPO in 2015 (mln EUR)
790 730
265 132 113
58 42
9 6 0 0 0
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NEWCONNECT SUPERVISION ARCHITECTURE: DIVISION OF COMPETENCES BETWEEN GPW AND PFSA
SUPERVISION STRUCTURE
POLISH FINANCIAL SUPERVISION AUTHORITY
WARSAW STOCK EXCHANGE -
ATS ORGANISER
ISSUERS
AUTHORIZED ADVISORS
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THE ROLE OF AUTHORISED ADVISORS
AUTHORIZED ADVISORS
Authorised Advisors are a key pillar of the NewConnect market architecture. The Authorised Advisor model is based on LSE AIM’s Nominated Advisors (Nomads), taking into account the obvious differences of scale and historical tradition as well as functional characteristics between these two markets.
The main responsibilities of Authorised Advisors defined in the ATS Rules include: • to check the issuer’s fulfilment of all conditions required for the introduction of the company’s
financial instruments to trading in the ATS;• to ensure that the prepared information document conforms to the requirements under the ATS
Rules;• to make a declaration to the effect that the information document is prepared in compliance with
the requirements under the ATS Rules;• to support the issuer in its compliance with the disclosure obligations under the ATS Rules;• to provide the issuer with on-going advice with respect to its instruments listed in the ATS.
The Authorised Advisors are supervised by GPW. The supervision is two-pronged: • on-going supervision including on-going monitoring of Authorised Advisors and imposing sanctions
under the ATS Rules in the event of any identified breach of the applicable regulations;• periodic supervision including annual assessment of Authorised Advisors mainly according to
qualitative criteria including the quality of introduced companies, the quality of documentsprepared by Authorised Advisors for the purpose of the introduction, compliance of the introducedissuers with the disclosure obligations, and other activities of Authorised Advisors in support of thedevelopment of the ATS.
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THE ROLE OF AUTHORISED ADVISORS
AUTHORIZED ADVISORS
• There were 80 Authorised Advisors as at the end of 2015
• The Authorised Advisor community is very diverse in terms of the scope of activity (ranging from companies whose core business is to operate as Authorised Advisors to companies for which it is an auxiliary business line), legal form (brokers, law firms, consultancies, auditors, etc.), size (revenue levels and staff numbers) and activity on NewConnect (number of introduced and assisted companies)
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auditors 4%
brokerage
consultancies 65%
law firms 11%
houses
20%
consultancies law firms brokerage houses auditors
DISCLOSURE OBLIGATIONS OF NEWCONNECT ISSUERS AND CHANGES UNDER THE MARKET ABUSE REGULATION
TILL 3 JULY 2016
• scope of current and periodical reports disclosed by issuers of shares listed on NewConnect and issuers seeking introduction to trading is included in the ATS Rules
• compliance with the disclosure obligations is supervised by GPW, which may impose penalties under the rules in the event of issuers’ non-compliance or inadequate compliance with the disclosure obligations
changes as of 3 July 2016 - EU Market Abuse Regulation implementing a common regulatory framework on market abuse as well as measures to prevent market abuse to ensure the integrity of financial markets in the EU
AMENDMENTS AFTER 3 JULY 2016
The key changes following the implementation of MAR include:
•Direct effect of most of the MAR provisions in all member states
•Scope of MAR covers alternative trading systems (MTFs)
•PFSA will take over direct supervision over ATS issuers’ compliance with such obligations (in cooperation with GPW)
•WSE will still be performing its supervisory functions with regard to obligations set forth in the ATS Rules (including periodic reports)
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ENTRY INTO NEWCONNECT CURRENT FORMAL REQUIREMENTS
CURRENT FORMAL REQUIREMENTS
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TYPES OF LISTINGS AVAILABLE ON NEWCONNECT
PRIVATE PLACEMENT –
a private offering targeted at maximum of 149 entities or individuals. Regardless of the size of the issue, admission to trading is based on a brief informational document approved by an Authorized Adviser by the Warsaw Stock Exchange; official prospectus approved by competent authority is not required
PUBLIC SHARE ISSUE –
this path involves the same admission procedures as those applicable on the regular market, in particular approval of the stock offering including the prospectus by the competent authority
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NEWCONNECT – BEST PRACTICE
CODE OF BEST PRACTICE FOR COMPANIES LISTED ON NEWCONNECT MARKET
principles setting high standards for the disclosure
policy and relations with Authorised Advisors
“comply or explain” reporting
CODE OF BEST PRACTICE FOR AUTHORISED ADVISORS ON
NEWCONNECT MARKET
code of behaviour for Authorised Advisors on the
NewConnect market in relations with issuers and themarket environment
Under the revision process
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WHO INVESTS IN NEWCONNECT COMPANIES?
individual investors with a bigger risk appetite looking for above-average return on investments
hedging funds
closed-end funds
asset management companies
private equity and venture capital funds
Share of investor categories in turnover on NewConnect, 2007-2015
3 2 2 2 3 10 7 7 6
92 92 88 87 77
73 69 70 75
5 6 10 11 20 17
24 23 19
0%
20%
40%
60%
80%
100%
2007 2008 2009 2010 2011 2012 2013 2014 2015
Foreign Individual Institutional 18
WORLD BANK REPORT
„SME EXCHANGES IN EMERGING MARKET ECONOMIES.
A STOCKTAKING OF DEVELOPMENT PRACTICES” - WORLD BANK REPORT
In January 2015, the World Bank published a report on organised markets for small and medium-
sized enterprises in emerging market economies. The report summarises the World Bank’s
longterm research project.
The report emphasises the importance of small and medium-sized enterprises in building up
emerging market economies and points out that SMEs must be supported in many ways, including
access to capital.
The World Bank has analysed seven SME markets: NSE IndiaEmerge (India), JSE AltX (South
Africa), GreTai Securities Market (Taipei), BM&FBOVESPA BovespaMais (Brazil), GPW NewConnect
(Poland), BIST ECM (Turkey) and TSX Venture Exchange (Canada)
The report showcases NewConnect as an SME market success story
https://openknowledge.worldbank.org/bitstream/handle/10986/21381/WPS7160.pdf?sequence=1
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WORLD BANK REPORT: FACTORS FOR ESTABLISHING SUCCESSFUL MTF
MOST EUROPEAN EXCHANGES OPERATING EFFECTIVE MTFs:
Focus on SMEs that have a fairly sizable growth rate, because they will have capital demands and
be most willing to use an exchange to obtain it.
Are legally related to a main board, often to receive some form of subsidy; few are stand-alone
entities.
Do not reduce disclosure content to reduce costs. Content is considered too important. They
reduce other requirements, such as the frequency of submitting disclosure documents and allowing
online dissemination rather than requiring printed materials.
Allow private placements to further reduce entry requirements, at least as a first-stage step to
being listed.
Have advisors that vet issuers and provide comfort to investors about the quality of the issuance.
To be most effective, these advisors should be licensed, regulated, and sanctioned if they support
too many ultimately poor performing issuers.
Have outreach, public awareness campaigns, and training for SMEs.
Benefit from tax incentives for investors, typically as part of a broader SME finance program.
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WORLD BANK REPORT: WHAT MAKES NEWCONNECT SUCCESSFUL?
Good timing: External conditions supported the setup of NC as bank deleveraging during the global economic
crisis reduced financing to SMEs, who then went to NC
Dynamic SME base: Although a young economy, Poland has a dynamic private sector with 4 million regulated
companies, of which 1.8 million are active. More than 99 percent of Poland’s companies are SMEs.
Strong retail investor base: A large number of knowledgeable retail investors comfortable with risk taking, who
were already active traders in the derivative and foreign exchange markets
Receptive policies and flexible and less onerous regulation:
– Reduced entry requirements, lower cost than main market
– Reduced ongoing reporting frequency and more time to deliver information
– Private placement mechanism, used by the vast majority of issuers
Well-regulated Authorized Advisors: To support companies through the listing process and vet the company for
investors. AAs can be imposed a sanction or even lose their licenses if they support too many unsuccessful
companies or if the companies introduced by them to trading are violating the binding rules
Willingness to address problems: 2011 saw a record 172 offerings on NC. However, they included some
companies of lower quality. Growing reputational problems (accusations of insider trading, bankruptcies) saw
trading volumes and offerings fall during 2012 and 2013. In 2013 the GPW announced higher requirements for
companies and AAs from June 1, 2013, in the interest of market quality and safety. This was to make the market
more attractive for investors and shift the focus from quantity to quality.
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NEWCONNECT – FURTHER DEVELOPMENT
GPW CONTINOUSLY IMPROVES THE RULES AND PROCEDURES BINDING ON
NEWCONNECT IN ORDER TO ADJUST THIS MARKET TO THE EXPECTATIONS OF MARKET
PARTICIPANTS AND CHANGING ECONOMIC ENVIRONMENT
GPW is currently implementing the „NewConnet 2.0” project which was announced in May 2015 as
a subsequent stage of development of this market, consisting in particular in performance of specific
tasks aimed at improvement of investors’ confidence and their activation on the market:
NewConnect promotion; cooperation with other institutions to improve the security of investors
NewConnect new segmentation based on quality factors and aiming at making it more readable and
thus encouraging to the search for new investment opportunities
improving transparency and accessibility of information about issuers and Authorized Advisors
presented on GPW websites
revision of the Code of Best Practice for Authorised Advisors and raising the standards of Authorised
Advisers
change of Best Practice for NewConnect listed companies, following the reform carried out on the GPW
Main Market
cooperation of the GPW with the Council of Authorised Advisors, established to support the
development of NewConnect
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THANK YOU FOR YOUR ATTENTION! Disclaimer
This presentation has been prepared by Giełda Papierów Wartościowych w
Warszawie S.A. (“Warsaw Stock Exchange”, “GPW” or “Company”) for its
shareholders, analysts, and other contractors. This presentation has been
prepared solely for information and is not an offer to buy or sell or a solicitation
of an offer to buy or sell any securities or instruments. This presentation is not
an investment recommendation or an offer to provide any services.
All efforts have been made to present the data in this presentation; however,
some data are derived from external sources and have not been independently
verified. No warranty or representation can be given that information in this
presentation is exhaustive or true.
GPW has no liability for any decisions made on the basis of any information or
opinion in this presentation. GPW informs that in order to obtain information
about the Company reference should be made to periodic and current reports
published in compliance with applicable provisions of Polish legislation.
Bartosz Świdziński
Director, Market Development Department
+48 22 537 71 84
WWW.GPW.PL
WWW.NEWCONNECT.PL
