EU Listing Act: Key changes for ECM

The EU Listing Act has been published in the EU Official Journal today (14 November 2024). 

The Listing Act is a package of reforms forming part of the EU’s wider Capital Markets Union project.

The reforms consist of:

• Prospectus and Market Regulations: a new Regulation amends the Prospectus Regulation, MAR, and MiFIR. Read the final text here.
• MiFID II: a new Directive amends MiFID II and repeals the Listing Directive. Read the final text here.
• Innovative Share Structures: a new Directive introduces multiple-vote share structures for companies aiming to trade on an SME growth market (MVSS Directive). Read the final text here.

For your ECM practice, we have highlighted the most relevant changes brought by the new legislation.

These changes may have an impact on IPOs, primary ABBs and rights issues. Stay ahead of the curve with our concise analysis.

General aspects 

The key objective of the Act is streamlining the listing process (and on-going regulatory burden) for issuers in the EU, to support the competitiveness of EU capital markets. 

Prospectus Regulation 

Exemptions from the prospectus requirement for secondary issuances

• The 20% threshold for fungible issues (to be admitted to trading on the same regulated market) without a new prospectus has been raised to 30%. This has also been extended to public offers (subject to certain conditions and requiring issuers to file a short-form document with a maximum length of 11 pages following new Annex IX).
• A new exemption is introduced for fungible issues (without a threshold/size limit) for companies already admitted to trading continuously on any regulated market (or SME growth market) in the EU for the 18 months preceding the offering or admission. Again, this requires publication of a short-form disclosure document following Annex IX.

         Market practice may still require offering documents.

• Subscription rights should also be covered by these exemptions.
• €1M threshold requiring no prospectus has been removed, with the total consideration exemption being increased from €8M to €12M

Minimum bookbuilding period

• Required IPO prospectus publication time before the end of the offer has been reduced from 6 to 3 working days

Financial information to be included in equity prospectuses

• Historical financials reduced from three to two years

New prospectus formats

• EU Follow-on prospectus (also for non-fungible securities) replacing the simplified prospectus for secondary issuances and the EU Recovery Prospectus
• EU Growth issuance prospectus, available for SMEs and non-SMEs which have securities already admitted or are to be admitted to trading on an SME growth market, replacing the current EU Growth prospectus
• Format of prospectuses to be further standardised, and information will be required to be disclosed in a fixed format
• Prospectuses relating to shares (only) are restricted to a maximum length of 300 pages (with some exceptions)
• Further delegated acts to be published will specify the template and layout of prospectuses. Importantly, derogations to the standardised format and maximum prospectus length are permitted in the case of a simultaneous offering or placement in a third country where an offering document is prepared under law, rules or market practice.
• Delegated acts will also specify which information issuers required to provide sustainability reporting in accordance with the Corporate Sustainability Reporting Directive (CSRD) will need to disclose

On 28 October 2024, ESMA published a consultation paper on draft technical advice concerning the Prospectus Regulation. This includes draft technical advice to the Commission in respect of the standardised format and sequence of prospectuses and proposed changes to Commission Delegated Regulation (EU) 2019/980. The deadline for response is 31 December 2024. ESMA expects to deliver a final version of its technical advice to the Commission in the second quarter of 2025.
 

Third country equivalence

• National competent authorities (NCAs) will no longer have to assess non-EU approved prospectuses for equivalence with EU disclosure standards. Instead, the Commission will adopt delegated acts granting equivalence in accordance with general criteria.

Market Abuse Regulation 

Disclosure of inside information

• The Act amends the requirement to disclose intermediate steps in a protracted processes so that issuers only need to disclose inside information to the market as soon as possible after the final event or circumstance in a protracted process has occurred.
• The Commission may provide further detail regarding final events or circumstances in protracted processes and the timing which would trigger the disclosure obligation.
• This does not amend the prohibition on insider dealing, creating a divergence between treatment of inside information at different stages in a protracted process.

Market sounding regime

• Clarification that the market soundings regime is a safe harbour from the offence of unlawful disclosure (and not a mandatory procedural requirement) is provided, reflecting market consensus.

Share buyback safe harbour reporting

• Issuers will only be required to report transactions under a buy-back programme to the NCA of the most relevant market in terms of liquidity for its shares (rather than to all markets where the shares are traded)
• Obligation to only disclose aggregated information to the public (rather than the detailed trade by trade data currently required)

Management transactions

• The €5k threshold for PDMR transaction reporting is generally increased to €20k (competent authorities may raise it to €50k or to decrease it to €10k)
• Clarification that the prohibition on trading during closed periods does not apply to transactions or activities that depend exclusively on external factors or that do not involve active investment decisions by PDMRs

Directive amending MIFID II

Free float 

• The required percentage of free float is reduced from 25% to 10%
• Investors considered for the free float calculation may also be from outside the EU

Investment research 

• Amendments to the MiFID II investment research rules re-introduce the ability for firms to rebundle payments for investment research and execution services

Multiple-vote share structures

• Applies to companies that seek the admission to trading of their shares on MTFs, which include SME growth markets, and that do not have shares already admitted to trading on an MTF or a regulated market.
• Minimum level of harmonisation of multiple-vote share structures across the EU Member States
• Enables controlling/original shareholders (i.e. founders) to have more voting rights per share compared with other investors/investors newly entering
• Safeguards protecting the right of newly entering shareholders as well as transparency requirements are to be implemented in Member States 
  Timing

Timing

Prospectus Regulation

Market Abuse Regulation

Amending Directive

Further Resources

For a more detailed overview (covering ECM as well as DCM) see Unlocking opportunities: The EU Listing Act explained.