Reversed listing in the Netherlands more stringent
The rules for a reversed listing in the Netherlands will become more stringent. On 4 December 2017, Euronext Amsterdam released a notice to this effect. In the event of a reversed listing, an Information Memorandum will need to be published that should largely include the same information as a Prospectus. The new rules will come into effect on 1 January 2018.
Abuse of reversed listing in the Netherlands
The Netherlands has a lively market for reversed listings on Euronext Amsterdam, where a (near) empty shell company and/or shelf company is used for a reversed listing to safe the costs of an actual listing. No prospectus is required. A reversed listing can indeed be a valid possibility for small and medium size enterprises (SME) to raise capital.
The side effect of the relatively easy and cost efficient possibility for a reversed listing in the Netherlands is that abuse is lurking around the corner. Some public companies in the Netherlands, virtually always with penny stock, have become large sink holes for SME’s. Although the SME’s themselves generally have good intentions with a reversed listing, that may not always be the case for shareholders who buy up empty listed companies and take the initiative for a reversed listing of one or more SME’s.
To counter the abuse of reversed listings in the Netherlands, Euronext Amsterdam together with the Netherlands Authority for the Financial Markets, have come up with new rules. These include:
- the issuer needs to publish an information memorandum that holds obligations similar as for a prospectus;
- an application for a reversed listing needs to be submitted to Euronext Amsterdam;
- the free float needs to be sufficient;
- the issuer needs to have a three year track record;
- a listing agent needs to be appointed;
- Euronext will charge an administrative fee of EUR 40,000 plus an admission fee for the listing of new shares.
Future of reversed listing in the Netherlands
We believe that these new measures are a good and necessary hurdle against market abuse. The cost of a reversed listing will go up and the rules will be more similar as for an IPO, although not as strict yet. We expect that this will result in less reversed listings, especially with respect to the shell companies that have a tainted background.
Penrose has ample experience with advising on reversed listings and we have also litigated several cases where dubious reversed listings were involved. For more information, please contact Hans Klaver.