HM Treasury and the UK financial regulator today confirmed that London's new Pisces private company stock market will launch later this year.
After it was proposed by Rachel Reeves in her Mansion House speech last year, the Financial Conduct Authority has today announced the rules for the Private Intermittent Securities and Capital Exchange System, to give the platform its full name.
"As companies choose to stay private for longer, there is demand for investors to trade private company shares easily and efficiently in an organised marketplace," the FCA said, with PISCES allowing secondary trading of these shares for institutional and "more sophisticated" investors, plus employees to buy and sell their own companies' shares.
Companies listed on a Pisces platform will be able to set the 'floor and ceiling' of share prices and will have a say over who can buy their shares.
It provides an opportunity for private companies to allow intermittent buying and selling of their shares without taking the leap to a full listing of their shares on AIM or the main market, meaning no significant increase in costs or disclosure requirements.
City firms can apply to run their own Pisces platforms and, as part of a four-year 'sandbox' period, with the FCA and government monitoring what happens in order to improve the regime before making it permanent in 2030.
Simon Walls, executive director of markets at the FCA, said these new platforms will "give investors greater access and confidence to invest in exciting new companies, while early backers and employees can sell up and invest again".
Pisces will create a new type of stock market that "won’t be like the ones people know today", said analyst Dan Coatsworth at AJ Bell.
While consumer-facing firms like AJ Bell are unlikely to run their own Pisces platform as the shares are not open to the public, Coatsworth said saw positives from its creation.
"Pisces could help private companies get used to the idea of slices of their business being owned by different people," he said.
"It might act as a stepping stone towards a public stock listing, getting them used to regular financial reporting, transparency as a business, and understanding that a company is run for the best interests of shareholders, not the board of directors."
Myles Milston, CEO and co-founder at Globacap, which is one of those planning to apply for authorisation, said Pisces "will accelerate the death of AIM" but will "help the UK build a world-class private markets ecosystem" by unlocking new sources of capital and enabling UK firms "to access the capital they need while remaining private and avoiding the headache of an IPO".
Jason Hollands, managing director of Evelyn Partners, said it is a "welcome development and a genuinely innovative one for the UK’s capital markets" and should "provide a helpful bridge for companies who are not yet ready for an IPO, but who may be on a journey to public markets over time".
But it might, "at the margin...have a knock-on impact for AIM" as some private businesses who might have previously contemplated joining AIM as the next step, "may conclude this is a much better option for the next stage in their evolution".
Coatsworth felt that Pisces was not replacing AIM as it will not support capital raising and won’t be open to the public.
"The launch of Pisces does not sound the death knell for AIM. If anything, it could shine on a spotlight on AIM’s advantages in letting companies access capital markets for growth funding and the ability to conduct share buybacks, the latter treasured by many investors in the current environment," he said.
AIM has seen a dearth of new admissions in recent years, along with private equity buyouts and other companies leaving as they feel the extra costs are not bringing enough liquidity in their shares.
Milston said the launch of the regulatory sandbox means the UK "has taken a big step towards unleashing billions in investment" with Pisces, a move that he said "unlocks a pathway to live-test new private markets infrastructure with real firms and investors in a safe, supervised environment".