When Euronext struck a €137 million deal in 2017 to buy the Irish Stock Exchange, the Amsterdam-based group said it was “ideally positioned” to benefit from post-Brexit opportunities. Six years on, the focus has shifted to the departure from the Dublin market of cement giant CRH and anxiety that it will soon be followed by gambling group Flutter.
CRH set out plans in March to shift its primary listing to the New York stock exchange, setting off handwringing in London because the move will mean it leaves the blue-chip FTSE100 index. Although the company will maintain a secondary London listing, that is not a good look for a market that presents itself as a global leader.
But the implications for the Irish market from CRH’s move could be even greater. The company will delist entirely from Dublin next month, ending a decades-long association with an exchange whose roots go back to the 1790s. With Paddy Power-owner Flutter also seeking a US listing, there are concerns that it too will go the way of CRH. The two companies comprise some 38 per cent of the annual turnover of shares in Dublin.
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It would be bad enough to lose only one, worse still to lose two — and there are concerns that yet more will take their lead. Although Ireland’s success at winning huge volumes of foreign direct investment has made it one of the fastest-growing European economies, the challenges facing the equity side of the Dublin stock market seem like something from a different world.
Euronext Dublin chief Daryl Byrne wrote in March to Minister for Finance Michael McGrath, saying other Irish-listed companies with significant US operations may follow in the footsteps of CRH and Flutter.
Warning of a potential loss to the exchequer of up to €300 million in tax revenue, Byrne says the delisting of the two companies or a shift towards US trading activity “is likely to have serious stamp duty implications in terms of the collectability and the amount of revenue generated for the State”.
Now, additional information has come to light about the response within the Department of Finance, where officials note potentially existential questions being raised down the line.
Given CRH and Flutter’s share of the trading volume on the exchange, the delisting of these companies will create difficulties for the public equities ecosystem in Ireland, resulting in a loss of revenues and commission
— Department of Finance officials
“An assessment of the impact on the exchequer and the economy from the loss of a functioning stock exchange for Irish listed companies [the exchange is still home to large trading volumes for funds and debt securities], both in the near and longer-term (five to 10 years) could be considered,” states a briefing note for the Minister from finance officials.
While that is cast as a question for later discussions, officials accept the potential departure of two significant companies “could harm Ireland’s attractiveness” for international equity investors. “Given CRH and Flutter’s share of the trading volume on the exchange, the delisting of these companies will create difficulties for the public equities ecosystem in Ireland, resulting in a loss of revenues and commission,” the note says.
“The industry that supports capital markets activity in Ireland has already contracted materially, as evidenced by the reduction in the number of stockbrokers to essentially two over the last decade.”
Although Euronext has always said the larger part of its Dublin business is in the lucrative listing of debt and funds, the finance note sets out a stark assessment of the challenges facing the equity side of the business after the CRH defection.
For one thing, finance officials say nutrition company Glanbia, insulation maker Kingspan and food group Kerry could be prompted to follow CRH with a US listing. Kerry Group had no comment on a possible US listing. Glanbia and Kingspan said they had no such plans.
The companies in question say they have no such plans. Still, officials point to the allure of US growth prospects and “siren calls” about liquidity and valuations. “[It] is certain that other larger companies are watching the CRH proposals with interest.”
In Ireland, the pipeline of IPOs and the current attrition of listings, point towards a long but steady decline of preference for the Irish exchange as a listing destination of choice
— Department of Finance officials
The lack of new companies joining the market only compounds the strain. With few flotations in prospect, as companies pursue alternatives to initial public offerings (IPOs), the picture cast by finance officials is one of stagnation and structural challenge.
“In Ireland, the pipeline of IPOs and the current attrition of listings, point towards a long but steady decline of preference for the Irish exchange as a listing destination of choice,” they say.
The paper points to three “interconnected but detrimental developments” in the past 15–20 years that combine to make Irish IPOs less appealing.
First was a reduced exposure by Irish pension funds to equities and diversification by such pension funds from Irish equities.
Second was a reduced number of local stockbrokers competing for IPO candidates and less “sell-side” research coverage.
Third was a “buy-side” shift from active stock picking to passive investment through exchange-traded funds.
“Despite an anecdotal increase in the IPO pipeline in late 2022 only three companies — Uniphar, Corre Energy and HealthBeacon — have floated in Dublin in the past four years,” the paper says.
For its part, Euronext Dublin accepts the Irish market has seen more departures than joiners over the past five years
Worse still, the official notes that HealthBeacon is the only one of 44 companies to have gone public since 2015 through the exchange’s “IPO Ready” programme. The officials suggest a review of that programme “could yield information” on the low conversation rate.
For its part, Euronext Dublin accepts the Irish market has seen more departures than joiners over the past five years.
“Along with equity capital market participants, we are working on a number of initiatives to reverse this situation and incentivise more IPOs on our markets, some of which will require Government support.”
Such challenges are not unique to Ireland. But in a booming economy, the domestic stock market faces imminent contraction and there is little by way of a panacea in sight.
