Solving the SME conundrum, Solving the SME conundrum, part two: Is rebundling research the answer?
Less SME research is often perceived as leading to less investment in SMEs, less secondary trading liquidity and ultimately fewer IPO listings1.
The solution from European and UK policy makers to counter the decline in SME investments is to allow for an exemption from the current research unbundling requirement if brokerage and research provision pertain to issuers with a market capitalization below €1bn2 or £200mln3 respectively.
While the new rules would only be optional, the question is whether rebundling research payments will achieve their regulatory intent to increase research coverage on small and mid-caps, or whether there are other factors at play which will have a greater impact.
In this four-part series, Solving the SME Conundrum, we look at the challenges facing SMEs and their access to capital markets. In Part One, we looked at the importance of IPOs in the SME eco-structure. In Part Two we explore the potential outcome of rebundling research and its impact on increasing investment in SMEs.
The report has been compiled by Vicky Sanders, Global Head of Investment Analytics, in partnership with Rebecca Healey and Charlotte Decuyper, Redlap Consulting