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Chancellor Jeremy Hunt is expected to set out plans in next week’s Budget for a regime to allow UK private companies to have their shares bought and sold on exchanges, with the aim of launching the system before the end of the year.
The Treasury is planning to start a consultation on Wednesday on the regulation of the initiative, which would give investors an opportunity to sell down part of their stakes in private companies on a limited number of days each year, an official told the Financial Times.
The idea for an “intermittent trading venue” was part of measures set out by Hunt in his Edinburgh reforms package in 2022 in an effort to boost the UK’s position as a global financial centre.
Ministers have been battling to shore up the UK’s capital markets, which have been hit by heavy investment outflows and a succession of companies floating overseas or moving their existing listings out of London, particularly in favour of the US.
The Private Intermittent Securities and Capital Exchange System (Pisces) would act as a crossover between public and private markets, allowing for some liquidity in the shares of private companies without the expense and regulatory burden attached to a public listing.
Companies would not be allowed to raise new capital through Pisces and retail investors were not expected to be permitted to buy shares using the system, the official said. Institutions and, if a company agrees, employees who owned shares in the business they work for would be allowed to trade via the system, the person added.
Proponents of the system, which would allow the London Stock Exchange and others to apply for permission to run Pisces trading venues, argue that it will boost the pipeline of London initial public offerings by encouraging companies to stay in the UK rather than listing overseas.
City minister Bim Afolami said in January that Pisces would “give private companies better access to UK capital markets, break down the artificial regulatory cliff edge that exists between the public and private markets”.
The system could also make it easier for investors to cash in on their gains by connecting them more efficiently with institutions that want to back private companies. Currently, shareholders must find a buyer themselves, making it more difficult to offload shares or agree a price.
The proposed regulatory model will draw from public market regulations, but without some of the more onerous requirements.
It would include bespoke disclosure rules for companies using a Pisces trading venue, which would take into account that shares would be traded only on certain days, the official said. Public companies, whose shares are traded throughout the year, are required to disclose sensitive information continuously to ensure a fair market.
Under the proposed regime, companies would be required to disclose information to investors using a Pisces platform but would not need to publish the information more widely.
Ministers are aiming to launch the system later this year as part of a so-called sandbox, allowing the Treasury to tweak the rules before it is made permanent.
Companies seeking to set up a Pisces exchange will require approval from the Financial Conduct Authority, the UK’s main financial regulator.
In the US, Nasdaq Private Market has allowed the trading of private company shares since 2013, while in the UK crowdfunding platforms such as Crowdcube and Seedrs enable secondary share sales along with others such as broker Winterflood Securities, with private company platform JP Jenkins.
One person familiar with the proposed regime said it would be better than existing options because there would be greater information disclosure by companies and the Pisces venue run by the LSE would be plugged into its public market infrastructure.
