Euronext de-lists small caps because of no accountant

Euronext Amsterdam sent a de-listing notice to six of its listed small caps as they failed to find a chartered accountant for public interest entities (PIEs). These small caps like map maker GeoJunxion, real estate investor Bever Holding or green investor New Sources Energy, have at most a few million euros revenues or are just empty holding companies such as Lavide. It can have multiple reasons why they lost access to a PIE accountant. The most common reason is that their accountants stopped their PIE practice. And finding a new one is not so easy anymore.

Only 6 PIE accountants

In the Netherlands, access to accountants certified to audit PIEs (in Dutch: “OOB’s” or “Ondernemingen van Openbaar Belang”) is increasingly limited. It has a number of reasons. First, the number of PIE accountants shrank to only six, as many other PIE accountants stopped their PIE practice. These six are now just the big four – KPMG, EY, Deloitte, PWC – plus Mazars and local champ BDO. The lack of competition is not good.

Why is the number of PIE accountants dropping over the years? Accountants like Baker Tilly and Accon stopped in the past years. They cited the high oversight burden, high risk exposure, and limited access to fully qualified resources. The latter, is also a problem for the six remaining PIE accountants. They typically refuse companies saying: “We are fully booked because we have a problem to find qualified staff”. Of course, the balance between risks versus rewards might tilt towards large enterprises. An accountant can make much more money from Shell, ASML or Philips, than from a small cap.

MTF as alternative

What can the notified smallcaps do? First, they can still try to convince in the coming six months one of the PIE accountants to take their case. But, it is hard to imagine that they didn’t knock already on all doors before to no avail.

Second, they can look at an MTF (multilateral trading facility). In the Netherlands, NPEX is by far the largest. Further, Euronext exploits MTFs in Paris and Brussels. It depends on the geographies of the small cap’s investors which MTF fits best. We recently invested in NPEX as we see the need for an alternative exchange, especially in the light of the PIE accountant problem. For being listed on an MTF, which knows all its investors as a closed trading platform, the audit requirements are more relaxed. Just the audit statement of a Chartered Accountant (Dutch: “RA” or “Register Accountant”) suffices.

Third, the small cap can look at re-listing at a regulated market in a country where access to PIE accountants is still guaranteed. Finally, the small cap can just decide to de-list.

As of today, it is not yet clear what the involved small caps will do. But, that it helps to develop alternative exchanges is for sure. Especially, because in a few months time, Euronext will send a next wave of notices to listed small caps without appropriate accountant.

Martijn Hoogeveen

Founder and CEO of Icecat NV. Investor. Ph.D.