“Stock exchange listing adds to a company’s credibility” – Malta Stock Exchange Executive Chairman, Joseph Portelli
The past eight years have seen the Malta Stock Exchange grow at a rapid pace, with the number of listings increasing by over 90%, at a time when the number of listings globally is on the decline giving an increase in private equity activity.
Joseph Portelli, who has been leading the Malta Stock Exchange since 2015, and is now the longest-sitting chair in the Stock Exchange’s three-decade history, shares his pride in the significant growth of the MSE, which today has over 110 corporate entities listed on the exchange, considerably more than other much larger European economies.
The Stock Exchange is a registered company, governed by the Companies Act, which is fully owned by the Maltese Government. Mr Portelli explains that the government has given the Stock Exchange free will to manage its affairs independently and according to market needs and trends, while ensuring that the highest corporate governance practices are followed.
“Our operating income has increased by over 100% since 2015. We have also paid the government over €35 million in dividends and corporate income tax, which ultimately accrues to the tax payer. These are metrics we are very proud of”, he explains.
Over the years, it has become evident that many more local businesses are appreciating the benefits of listing on the stock market, which provides access to a vast pool of capital from investors, allowing businesses to raise funds for expansion, research, development and other strategic initiatives.
What held businesses back? “I think a lot of businesses fear scrutiny and the additional governance and compliance costs that may be associated with a listing”, Mr Portelli argues. This concern may be misguided benefits far outweigh the negatives, he adds.
”Your suppliers, employees, customers, and creditors will see a listed company as significantly more credible”, he insists.
This credibility indeed arises from enhanced regulatory scrutiny for listed companies, as these would be then regulated by the MFSA and to a lesser degree, by the Exchange itself. This brings with it legal responsibilities when it comes to compliance, risk, and governance issues. It also adds discipline and sophistication to the company in general, which in turn enhances its reputation and will help to attract potential investors.
In parallel, listing on the stock market enhances liquidity for existing shareholders. Publicly traded companies allow shareholders to easily buy or sell their shares, providing them with a means to quickly convert their investment into cash. This liquidity can attract more investors, as it offers the flexibility to enter or exit positions as needed.
Mr Portelli suggests that the MSE’s success was not solely a result of more entrepreneurs appreciating the benefits of listing but also the effectiveness of the Exchange itself in creating a successful corporate communication strategy. He takes us back to the early years of the previous decade, where he had strong doubts about its appeal “I do not believe it would have stood out as a stock exchange, other than having a two-metre-long stock ticker display”, he recalls.
Today, the technology display at the exchange is, by all accounts, quite impressive and reminiscent of what you would see on Wall Street. “We organise bell-ringing ceremonies, an annual awards dinner, we publish the Malta Stock Exchange Business Review annually, we regularly interview executives on leading publications, we publish monthly and semi-annual newsletters, and we organise a large annual two-day conference. I think we’ve been very effective at raising awareness and have taken a leading role within the Maltese capital markets.”
Despite this success, the MSE is continuously looking ahead, and two projects in the pipeline concern the shipping and the digital spheres. With regards to the first, the MSE is keen to maximise the potential offered by Malta’s large and growing maritime industry and one of the world’s largest shipping registers.
Mr Portelli explains that “it makes sense to create a niche “blue-market” capital markets industry. This could also complement our international listing and digital asset strategy. We are also studying the prospects of setting up a blockchain-enabled fish market. But I want caution; we are still in the embryonic phase and studying the feasibility of such a novel project”.
When it comes to plans for a digital exchange, Mr Portelli takes a more guarded approach. “It is our mission to enable the Maltese capital markets with every opportunity to raise capital efficiently and cost-effectively. If that means that digital assets traded on a block chain platform will add value, then we will pursue that strategy”, he explains.
The Stock Exchange has already created a digital asset-focused company called MSX but the way ahead is a long and challenging one. Firstly, it has not yet identified a technology partner which offers a cost-effective trading platform. Secondly, demand for a blockchain-enabled trading platform from local issuers has been negligible. “Until that demand surfaces, an MSE blockchain-enabled platform will remain on the back burner”, he concedes.
Asked about his plans for further growth, Mr Portelli said that the Exchange is very keen on raising its international profile and attracting international listings to the stock exchange. While appreciating that other exchanges, such as Ireland and Luxembourg and other non-EU jurisdictions are currently ahead in this field, his commitment persists.
“The MSE will continue to do what it takes to raise awareness internationally that Malta could be a cost-effective solution for an international listing,” concluded Mr Portelli.
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