The FCA today confirmed in a joint statement with economic secretary to the Treasury, Emma Reynolds, that its Pisces private stock market will launch later this year.
The government and the regulator expect Pisces to ‘strengthen UK capital markets’ and support economic growth as part of wider efforts to boost the economy.
Pisces won’t be open to retail investors – unless they are employees of the company issuing the shares but it could act as a stepping stone for private companies towards an IPO on a public market.
“The proposed new stock market called ‘Pisces’ won’t be like the ones people know today. It’s just for privately-owned companies and while it won’t be open to the public, there are positives from its creation,” says Dan Coatsworth, investment analyst at AJ Bell.
“Pisces could help private companies get used to the idea of slices of their business being owned by different people. It might act as a stepping stone towards a public stock listing, getting them used to regular financial reporting, transparency as a business, and understanding that a company is run for the best interests of shareholders, not the board of directors.
“It could also encourage their staff to develop a saving and investing habit. One of the biggest stumbling blocks for private company share ownership is that staff are often put off by the general inability to sell those shares at regular intervals. A lot of private companies won’t offer the ability for staff to trade shares, meaning some people are stuck owning the equity until the business either lists on a public market or there is an internal event where they can sell down.
“In theory, Pisces could improve liquidity by allowing private company shares to be traded at more regular intervals. However, it has only been designed for intermittent trading, not the continuous trading during market hours that you get with publicly listed stocks. Such restrictions would give a company control over when changes in share ownership can happen.
“Disclosure requirements will be different to public markets in that investors taking part in a Pisces trading event should be told about company-specific information, but details won’t have to be made public. Lower levels of disclosure make Pisces-traded shares higher risk than ones available on London’s Main or AIM markets.”