Trintech should think twice about double listing panacea

Not so long ago, Irish high-technology companies had barely any choice when they wanted to go public. Either they took a listing on the Nasdaq market in New York and took their chances with the volatility of that market, or they listed on the smaller-companies DCM and AIM markets in Dublin and London.

Not much choice there. The DCM and AIM markets are widely thought to have failed and institutional investors have tended to shy away from markets which suffer from lack of credibility and where listing requirements are too lax to satisfy the requirements of investors. In any event, many investment funds - particularly the risk-averse pension funds - are prohibited from investing in any company that is not listed on a "senior" market.

Irish companies' experience of Nasdaq's volatility have been well documented by now, with CBT, Iona, Icon and Saville all suffering from Nasdaq's penchant to savage a company's share price when it fails to meet market expectations or gives the market a nasty shock in the shape of a profits warning. Certainly, Iona and Icon deserved to suffer for their profits warnings, but it is arguable that the sort of treatment they suffered on Nasdaq was excessive - with momentum investors dumping shares in their droves even though the underlying performance of the companies might not warrant that sort of treatment.

Now Trintech is trying to hedge its bets by taking a joint listing on Nasdaq and the Frankfurt-based Neuer Markt - the rationale here being that the relative stability of the German investors who dominate Neuer will counterbalance the volatility of the Nasdaq and prevent Trintech's share price suffering from the sort of treatment that drove CBT, Iona and Icon downwards and drove Saville shares to a level where the company ended up being bought out on the cheap.

Current Account is not altogether convinced by this argument. If Trintech at some stage in the future fails to meet market expectations, on what basis is the Neuer listing going to prevent a sell-off on Nasdaq that will knock the share price for six?

Certainly, the Neuer listing has attractions and is probably a better bet for a company like Trintech than a listing in Dublin or London, but is the typical German retail investor who dominates Neuer simply going to ignore events on Nasdaq? Neuer, as the dominant member of the Euro.NM alliance of European markets, has helped many small companies to raise capital, but it is difficult to see how Neuer investors would simply sit on their hands if momentum investors on Nasdaq dump a company's stock.

Interestingly, as Neuer has boosted its presence in the technology sector and Nasdaq continues to flourish, the London Stock Exchange is belatedly getting in on the act with the launch of its own Techmark exchange for high-tech companies. It remains to be seen how attractive this market will be to Irish companies and one important question is whether an Irish company will be included in the separate FTSE index for Techmark.

In the past, FTSE indices have excluded Irish companies - including the FTSE-100 index - on the basis that the indices are meant to reflect the British economy and not necessarily the size of a company listed in London. If FTSE rules mean that Irish high-tech companies would be excluded from the planned FTSE Techmark index, then the new market would have limited attractions.