ISE plans market for technology firms

The Irish Stock Exchange is planning to launch its new market for technology companies next month, according to market sources.

Known as "iteq", the project is aimed at attracting technology firms to list in Dublin and will be subject to a set of listing rules suitable for rapidly growing companies. Sources said the new rules will require greater information disclosure by the floating company rather than requiring it to seek shareholder approval when making acquisitions.

And it is proposed that there will be no stamp duty charge for investors on some share purchases on the "iteq" market. Stamp duty will not arise on share purchases where the company is quoted on both Nasdaq and on the "iteq" and where trading in Dublin is in the same share instrument as on the Nasdaq - the American Depository Receipt.

Draft proposals for the new market have been circulated and Irish Stock Exchange officials and stockbroker representatives met last week to consider the proposed listing rules. The rules for the new market are expected to mirror those for listing on Nasdaq in the US, a market largely made up of fast-growing technology companies, and the Neuer Markt in Frankfurt.

Introducing a new Irish market is aimed at meeting criticisms that the rules for joining the official list - the main market - are too rigid for developing technology companies and fail to recognise their unique financial and other characteristics.

Over the last year to 18 months most of the rapidly growing Irish technology companies that have taken the flotation route have not listed in Dublin. The latest company to float - Conduit - listed on the Neuer Markt. Smartforce listed on Nasdaq, Parthus and Baltimore listed on Nasdaq and in London, while Trintech chose the Neuer and Nasdaq.

Listing rules for the new Dublin market will be geared towards growth oriented companies in dynamic industries which need to respond quickly to acquisition opportunities in order to achieve or to hold on to the so-called "first-mover" advantage.

The development of such companies would be seriously hindered by existing listing requirement such as the need to get shareholder approval, according to company sources.

Developing technology companies generally have growing sales or turnover figures but are often loss-making or barely profitable. Because they have no profits they have problems dealing with transactions such as acquisitions or mergers under existing market rules.

Even if their market capitalisation is many times that of the company they buy, if they have no profits or their profits are less than those of the company being acquired, they are required to get shareholder approval for the transaction.

The London Stock Exchange and Deutsche Borse will offer UK retail stockbrokers up to £8 million sterling ($12 million) to subsidise the bill for the German technology that will power the planned iX exchange.

The new exchange will use the German Xetra trading system, meaning that British brokers have to write off their claimed £1 billion investment in Sets, the London system.

The £8 million subsidy is partly an inducement to the brokers to support the £120 million ($114.00 million) merger, which requires a 75 per cent vote in favour by LSE shareholders.