Until now, there have been limited possibilities for raising investment for newer and smaller companies. The traditional listing on a stock market does offer access to capital and a wider shareholder base, but it comes with considerable cost and significant regulations.
Private businesses looking for external investors have limited options, particularly if the original founders and owners prefer not to lose overall control by selling to private equity or a trade buyer.
The UK does have tax incentives and other arrangements that enable mainly experienced investors to buy minority stakes in growing businesses. However, these new shareholders will often want to sell their shares at a profit within a relatively short time, often 3 to 4 years. The pressure to create an “exit event” within this timescale may not align well with the strategy that the founders have for the business, and this can create significant conflicts.
The UK Financial Conduct Authority (FCA) is creating the Private Intermittent Securities and Capital Exchange System, or PISCES for short, as another way for companies to raise capital. It is designed to be more attractive for investors, as there is now the possibility of selling shares at any time without having to wait for the traditional “exit event.”
The combination of lower costs and greater flexibility makes PISCES an important part of growing the UK economy and attracting more businesses to establish themselves here.
When PISCES is launched later this year, the FCA will approve a number of PISCES operators who will manage the trading platforms. Its main features will include:
- A number of FCA-approved PISCES operators will be able to set up different markets (platforms) with different rules, giving companies a choice.
- Operators can decide how frequently shares can be traded, known as trading events. For example, these could be every three months or only once per year. Companies can choose the operator that best suits their needs.
- It is only for secondary trading in existing shares and cannot be used by companies to raise money from new shareholders or for share buybacks.
- Companies can decide who can buy their shares, so unwelcome or competing shareholders can be excluded.
- Companies can fix upper and lower price limits between which their shares can be traded.
- Certain core disclosure information—including a business overview, a management overview of the company, financial information (including financial statements for the last three years), and key risk information—must be made available to potential investors before the trading event takes place, but this information will not be publicly available.
- There will be no requirement to give trading forecasts or other forward-looking predictions.
- The market is reserved for more sophisticated and knowledgeable investors, who will be expected to make their own evaluations of the risks and rewards.
- Buyers of shares through PISCES will not pay Stamp Duty.
More information about PISCES can be found on the FCA website:
https://www.fca.org.uk/markets/pisces-private-intermittent-securities-capital-exchange-system#section-how-pisces-works
The system is currently operational in a testing mode with real transactions, so it is already available to use.
Companies interested in eventually using PISCES should consider establishing their UK company now so they are ready when the system becomes more widely available, which is expected before the end of 2025.
