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News : Irish Economy Last Updated: Sep 18, 2013 - 11:22 AM

Irish Stock Exchange: Born in 1793 - slowly dying in 2013
By Michael Hennigan, Finfacts founder and editor
Sep 17, 2013 - 7:36 AM

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The ISEQ index 1997-2012

The Irish Stock Exchange, which was founded in 1793, suffered the latest blow to its credibility on Monday when Grafton Group, the building materials business and owner of Woodies DIY outlets in Ireland, announced it was quitting the exchange and moving its main listing to London.

Grafton said that 75% of the firm's revenue has for some time been generated in the UK and most of the development activity is taking place outside Ireland.  In addition, the shareholder profile of Grafton has changed significantly and the majority of the firm's shares are now held by institutional investors located outside of Ireland.

When CRH, the building materials multinational, moved its primary listing to London in 2011, it said it believed that inclusion in the FTSE would result in a further increase in UK and international investor awareness of CRH.

United Drug decamped in 2012 and was followed by DCC earlier this year.

With the banks on respirators and Elan to disappear soon, there are only 8 other Irish companies with primary listings on the Irish exchange and values above €1bn. Ryanair, which is also listed on the US Nasdaq Market, with a market capitalisation of €9.2bn, accounts for 27% of their value. Next in line is Kerry Group, which accounts for 23% of the value of €34.5bn.

Smurfit Kappa is an Irish-Dutch group valued at  €3.9bn and Aryzta AG, is a Swiss company that was formed from an Irish Swiss merger, valued at €4.3bn while Paddy Power is valued at €3.0bn.

The Irish Stock Exchange told Finfacts in early 2007 that an estimated 60% of Irish shares were owned outside the Republic of Ireland.

The departure of Ryanair and a few of the others in coming years, would make the ISEQ index effectively redundant.

“Ireland has one of the highest levels of business startups in the EU but the vast majority of companies sell at a relatively early stage,” Deirdre Somers, chief executive of the exchange, said last September. “The Government’s enterprise policy should include an ambition to build at least 5 to 10 companies to scale with a market capitalisation of over €1bn in the next five years whether through organic growth and/or acquisition.”

It is not true that Ireland has one of the highest levels of business startups in the EU. Besides, a study of business demography in Ireland found no clear link between new business formation and economic growth in 1994-2004, when the ‘Celtic Tiger’ was Europe’s fastest growing economy.

Somers added that international experience shows stock exchanges are under pressure worldwide, with the main US exchanges losing 44% of their listed companies over the last five years and London’s Alternative Investment Market losing 35% in the same period.

The proportion of people in Ireland who are early stage entrepreneurs has fallen (6.1% in 2012 from 7.3% in 2011) and Ireland’s ranking against other countries has declined. Ireland is now ranked 18th among the 34 mainly developed OECD countries, 14th of the EU-27 countries (of 22 countries included) and 6th of the pre-2004 EU-15 countries.

See OECD data here as well.

According to the Economist in 2012: "The number of public companies has fallen dramatically over the past decade - - by 38% in America since 1997 and 48% in Britain. The number of initial public offerings (IPOs) in America has declined from an average of 311 a year in 1980-2000 to 99 a year in 2001-11. Small companies, those with annual sales of less than $50m before their IPOs—have been hardest hit. In 1980-2000 an average of 165 small companies undertook IPOs in America each year. In 2001-09 that number fell to 30."

In the high tech area, venture capital investors are likely to push Irish promoters to take an attractive offer, usually from overseas, rather than wait for an IPO.

Finfacts report, June 2007: High foreign ownership of Irish shares will be bad news for stock market in 2008 when housing output will plunge 28% compared with 2006 peak

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