Fabrice Demarigny, director of capital markets at Mazars, has drawn a report called “Small Business Act” that calls for a new directive on the listing of small and medium size businesses. Demarigny explained in an interview to Wall-Street why SMEs are so important for the European economy and what must be done to encourage them to go public.

Wall-Street: Why, in your opinion, SMILEs are so important to the equity markets?

Fabrice Demarigny: A study published by the European Commission, has measured the impact of the EU Directives on the Initial Public Offering (IPO) market. One of the conclusions of the study is that the decrease of activity on the IPO market is not purely cyclical. Clearly, initial and ongoing requirements for issuers have impacted the decision-making process to float a company as well as the way exchanges have structured their listing and trading facilities. Furthermore, statistics show a constant decrease in the number of listed companies on EU regulated markets.

This can be explained by the decreasing number of new entrants but, more significantly, by the fact that listed companies decide to de-list and go private.

This trend mainly affects Small and Medium-sized Issuers Listed in Europe (SMILEs) . This difficulty of SMILEs to access capital markets has become even more critical with the financial crisis. And even if Member States made efforts to have a more fluid lending, the capital markets remain the only valid alternative for SMILEs to access long term finance.

A large number of SMILEs, but also regulators, public authorities, exchanges and stakeholders shared the view that the initial and on-going listing costs outweigh the benefits . It appears therefore that the EU Directives have set requirements, applicable to all issuers irrespective of their size, representing a barrier too high for Small and Medium Com