By Jesús González-Nieto, Head of BME Growth
In 2021, global regulated securities markets witnessed a year of strong growth experienced by small and medium companies.
Spain was no exception here, which is unsurprising since small and medium companies play a crucial component in the country’s market. More than 99% of Spanish companies are SMEs, and they employ 80% of the country’s workforce and represent 65% of Spain’s GDP.
But how are we supporting these smaller companies in our market? The answer is via BME Growth.
SME activity in Spain: an overview
To support this continually growing and evolving market, we continue to work with SMEs through our SME stock market, BME Growth. For nearly the twelfth year in a rowwe have been bringing small companies closer to the market and help them to access equity financing easily and efficiently.
This initiative ultimately aims to accelerate SMEs’ growth process and in the most successful cases, help them make the jump to the stock exchange. In 2021, we saw continued growth in this area, with 16 new companies listed on BME Growth. When compared to the 10 new companies listed in 2020, we see that SMEs are stepping into centre stage in the global markets.
BME Growth today has 127 companies listed and a market capitalisation of EUR 19.060 billion, almost the double the amount of 4 years ago. Companies listed on BME Growth are also experiencing faster growth than their off-market counterparts. For example, in 2020, in the middle of the lockdown for COVID, sales raised by 7% and workforce by 25% up to 13.827 employees.
One thing is clear – it’s time to take note of SMEs position in the market.
Which SMEs are gaining momentum?
When it comes to the breakdown of sectors which are gaining momentum on BME Growth, the technology, biotech/health, engineering, telecommunications and renewable sectors are the largest. If we consider these SME growth areas, we can build a future-gazing snapshot of how Spain’s economic backbone will be composed in years to come.
The growth experienced by BME Growth in 2021 marks yet another year in which our SME stock market have provided financing to companies who have traditionally found it difficult to diversify their sources of funding, due to their size. €960 million were raised by BME Growth companies in 2021, and more than €5.6 bn since its inception.
What the next year holds for SMEs in Europe
European governments have reaped great benefits from the presence of SMEs in the market. Today, they contribute to over half of Europe’s GDP, employing around 100 million people.
Given that SME lie at the heart of Europe’s economy, it’s vital for the wider market that SME continue their growth within the capital markets infrastructure. This will help SME, both in Spain and further afield, to compete at an international scale while retaining their integrity and ability to learn and grow. As well as setting SME up for success later on, continued support throughout the listing process can also increase healthy competition amongst exchanges.
The European Commission is preparing a set of regulations in this direction – the so called “Listing Act”. It is a perfect opportunity to set up a more efficient and flexible environment that allow SME to tap markets in a faster and costless way. Adapting the documentation that a small company needs to produce and speeding up the registering processes with the Competent Authorities is essential. Also, by rethinking what necessary information is required of listed companies will reduce their costs and time invested.
Why should exchanges continue to encourage SMEs to enter the market?
There are numerous benefits that exchanges can experience by supporting SMEs. For example, it can reduce the costs associated with listing and create a more attractive environment for all businesses in the market. This will ultimately lead to increased listings overall.
Transparency also has a part to play in maintaining credibility and boosting listings in both the SME markets and traditional Stock Exchanges. Today, listed companies are held accountable for their reporting and revenues by numerous investors, analysts, supervisors, and regulatory authorities, which requires an adequate level of transparency.
This requirement for transparency is equally applicable to SMEs throughout their listing journey, which will provide them with greater credibility. As a result of this increasing credibility, SMEs will experience an increase in awareness for their listing, leading to an increase in value in the market. A Pre-Market initiative like Spanish Entorno pre Mercado, an educational program that also provides training, mentoring and networking for companies thinking in going public, has shown its success in recent years. Supporting this growth amongst SMEs will therefore result in greater growth and credibility across the stock exchange market.
