[co-authors: Yiran Jiang and Stefano Bandini]
As legislators in Rome finalize sweeping reforms of Italy’s financial laws and regulations and the EU Council just adopted the so-called “listing package” to increase attractiveness of EU financial markets, the national government and the most significant regional authorities are introducing financial incentives for small and medium-sized entities (“SMEs”) to list their shares.
At the national level, the Fondo Nazionale Strategico Indiretto (“FNSI”), a closed-ended fund of funds managed by Cassa Depositi e Prestiti being introduced to deploy at least €700 million for investments into SMEs. The funds will invest in newly established Undertakings for Collective Investment in Transferable Securities (“UCITS”), with investments targeting SMEs. FNSI will underwrite up to 49% of the newly established UCITS. The UCITS will, in turn, invest 70% of the capital in listed SMEs with market capitalization of less than €250 million, including companies listed on the Euronext Growth Milan (“EGM”). The national government plans to finalize the necessary regulations by the end of the year and begin investing in the first quarter of 2025.
Separately, the region of Lombardia, the commercial center of the country accounting for nearly a quarter of the nation’s GDP, has launched the Quota Lombardia initiative, which is specifically designed to provide financial assistance for SMEs seeking to list on EGM. Launched early last month, this program has a budget of €25 million to be spent over the next three years. Each eligible company can apply for a grant of up to €600,000 divided between costs related to the listing and consultancy services (e.g., financial due diligence, legal, industrial plans, investor relations, and tax assistance), including where such costs sustained in the three years following IPO. To be eligible, SMEs must (i) be registered in Lombardia when applying for the grant; (ii) undertake to list their shares with a capital increase of at least 50%; and (iii) have a registered office and operational headquarters in Lombardia, which must be maintained for at least three years after the last disbursement of the grant to the recipient.
Together, these national and regional initiatives provide both the capital needed for the listing process and a ready pool of IPO investors that will benefit from enhanced liquidity in the secondary market. We anticipate that SMEs will act on those incentives and there will be a marked increase in EGM IPOs in the coming years, particularly by SMEs based in Lombardia.
