Simone Huis in ’t Veld (Euronext) on SPACs and Other Business Models on the Stock Market
Simone Huis in 't Veld worked in the banking world for 20 years before moving to Beursplein, Amsterdam in October 2019. At Euronext, she wears two hats. She is CEO of the Amsterdam Stock Exchange and, together with the six other country CEOs, she is a member of the Board of Directors of the pan-European stock exchange company. When the coronavirus pandemic broke out six months after she took up her position, she was lucky enough to have already met her European colleagues. The pandemic resulted in very lively, volatile trading. Now that the economy is recovering “faster and more robustly than expected”, both the Dutch stock exchange and the European umbrella platform appear to be in good shape. “The AEX is a good indicator. At the beginning of this year it hit 631 and mid-September it even closed at 800, which is almost double since the low of 432 at the beginning of the crisis.”
The number of Initial Public Offering (IPO) is also growing again, with 17 so far this year in Amsterdam and more than 150 at group level. “And the pipeline remains well filled.”
Euronext already operated the stock exchanges in Amsterdam, Brussels, Paris, Lisbon, Dublin and Oslo. Thanks to the acquisition of Borsa Italiana Group in April this year, Euronext is now also the largest pan-European stock exchange, the market leader in Europe in terms of stock exchange listings and the largest in trading in shares and bonds. “If you look at what has happened over the past two years, I came on board at the right time”, says Huis in 't Veld.
What do you see as the benefits and challenges of pan-European collaboration within Euronext?
‘We work according to a ‘federal model’, which requires time and occasionally it needs explanation of how things work on a local level and how we can benefit or learn from that as a group. In that sense, we sometimes have to slow down in order to accelerate and become stronger again over time. However, I do not see that as a disadvantage. This mutual collaboration is important as we have to compete with the rest of the world, and London and New York in particular. Our seven stock exchanges share one trading system, have one liquidity pool, one order book and one harmonized rule book. That has many advantages for both the companies listed and the investors.’
It sounds like the European Union could learn something from that. Do the interests of the seven local stock exchanges ever clash with those of the Euronext global trading platform?
‘Within the board, we explicitly do not operate as standalone stock exchanges that preserve their national interest; the discussion focuses on how Euronext can contribute to the European capital market. On the contrary, investors do consider the differences between countries when choosing one of our stock exchanges. There are differences in terms of corporate governance, tax regulations and company law, for example. Whereas in the past, Amsterdam was seen as an alternative to London, people now look first at Europe and therefore at Amsterdam. The government and regulators in our country are seen as reliable and predictable. Another advantage of the Netherlands is the level of education, the fast internet, the logistics connections and the fact that almost everyone speaks English here.
We also notice that companies often simply choose a stock exchange where they are surrounded by industry peers that they can compare themselves with. Oslo is strong in shipping, fishing, oil and gas; France in luxury goods and the car industry. Milan is all about the four Fs: Fashion, Ferrari, food and furniture. Amsterdam excels in tech and fintech, with successful clusters around ASML and Adyen. What it is equally unique about the Netherlands is that, compared with other countries, we have a remarkably international investor base. Of the total investments on Euronext Amsterdam, 75% come from abroad; on the AEX, this is as high as 90%. This attracts companies to look for that international capital.’
The high regulatory pressure is seen as the disadvantage of a stock exchange listing, as it can be an obstacle for smaller companies in particular. How do you ensure that you remain attractive to them?
‘Companies interested in going public need to be well prepared, no matter what. In order to help them with that, we developed the TechShare educational program for fast-growing, innovative tech companies, which explains the capital markets and the IPO process. In addition, I can only point out the advantages of a stock exchange listing for any company looking for capital. It is good for your reputation, stability, name recognition and transparency, which makes financing easier. Something we also often hear is that a stock exchange listing helps attract talent. Moreover, having a broad group of investors increases your independence.’
How do you assess the rise of private equity parties? Their pockets are getting deeper, as is also apparent from the private equity route that multinationals such as Unilever and Phillips have chosen for their spin-offs.
‘It goes without saying that private equity is a competitor, but there are situations in which some solutions are simply greater than others. At the same time, private equity is also a principal for the stock exchange. The financing made available by one of those parties is not endless. For companies that want to continue to grow after the private equity party has left the company, the capital market is a logical next step.’
A characteristic of the Amsterdam Stock Exchange is the lack of Dutch cornerstone investors, who commit to take up a substantial part of the shares to be issued, for example in the event of a flotation. Should pension funds and insurance companies invest more in a number of large Dutch companies that are fundamental for our economy and infrastructure, in order to strengthen the underlying foundation?
‘Dutch cornerstone investors are particularly important to Dutch small and mid-cap companies with a market value of between €100 million and €500 million. We would like to serve them on our capital market, but the majority of potential investors come from abroad. They are willing to get in on an IPO of a Dutch company, but they are reluctant to do so if they notice that there are no Dutch cornerstone investors. This is much more prevalent in countries such as Norway, France, Portugal and Italy. It is precisely because the Netherlands has such an international economic system that our institutional investors have a very international focus. They look primarily at return and consider substantial investments in smaller Dutch companies as much less important. It is a shame, since mid-caps in particular have a flywheel effect on our economy: If they grow, the entire ecosystem grows as well. It is unfortunate when that kind of company goes abroad or looks for money on the foreign capital market. That is the reason why we organize dialogue sessions on this topic with lots of different parties, where everyone – including the institutional investors – agrees with this line of reasoning. Yet, in practice, they stick to their investment beliefs.’
The current investment trend is SPACs: Special Purpose Acquisition Companies. The aim of these listed shell companies is to raise capital to finance a takeover of a private company, usually within two years. This is done to merge with the private company in the long term and leave the listing to that company. Are SPACs a serious business model?
‘In Amsterdam, we make sure that those who introduce a SPAC are solid sponsors with a good reputation, who understand the market and know what is on offer. We also assess whether the prospectus meets all the rules. If all of that is in order, it can be an excellent route for companies that meet the quality requirements for being listed, but see certain objections to a traditional flotation process. The main advantage is speed. With a SPAC, you can go public in four to six months instead of the usual 12 to 18 months. Another advantage – especially in this volatile market – is the certainty of the valuation. The price per share is set at the time of the merger, which makes it transparent beforehand.’
Investors in SPACs invest in a promise and in a team, with little further specification as to which company will ultimately be bought. Which checks and balances are in place to safeguard the interests of private investors in particular?
‘There are two points for assessing whether a SPAC is successful. At the launch and at the de-SPAC: The moment when the SPAC enters into a merger with a company. Investors who do not agree with the takeover target in question can then ask for their investment minus the costs back. It is important, however, that a document containing the full information is available in due time and clearly describes what the acquisition entails, followed by the retail investors reading the document carefully.’
To what extent are institutional investors attracted to SPACs?
‘This year, we have introduced 17 SPACs on Euronext and 11 in Amsterdam. So SPACs are becoming increasingly attractive, appreciated and respected by companies and investors alike. Showing they can make good acquisitions over the coming period is of course crucial. Last year, Dutch Star Companies One was an example of a successful de-SPAC for its acquisition of CM.com. The SPACs that are listed on Euronext and Amsterdam this year are yet to make this move.
I know that there are many proponents and opponents of SPACs, and it is not for me to pass judgment on them. As a stock exchange, we monitor whether the introduction and de-SPAC take place within the rules and guidelines and whether there is a good information document available when an acquisition is announced. It is up to the market to decide if it wants to invest in SPACs.’
Hybrid companies such as ABN AMRO as a state-owned enterprise and Heineken as a family-owned enterprise want access to the capital market while retaining control. How do you see the place of such companies in the stock exchange?
‘The stock exchange is suitable for all types of businesses. That is what makes it so unique and attractive. But this also applies to these types of companies: Everything must be clearly structured, organized and documented so that the investor understands how the shareholder structure works and why the decision was taken to go public.’
One of your ambitions when you took up your position was to attract more private investors. Is that happening yet?
‘Over the past two years, the share of retail investors on Euronext Amsterdam has increased from 5% to 8%. One focus area is the younger generation: We need to ensure that investing does not become a game for them. They invest in products that are not traded on the stock exchange, such as crypto coins. That is one of the reasons why we have launched an education platform: So that we can also explain to them the importance of investing in a regulated, transparent market and clarify that investing is completely different from speculating or pressing a few buttons in an app and seeing confetti on your screen when they have made a trade. It involves spreading risk for a long-term yield and understanding how this affects for your pension.’
The Amsterdam Stock Exchange is also the Euronext headquarters. Does that help in attracting and retaining talent?
‘Lots of teams in Amsterdam work for the entire group. In Amsterdam we supervise the derivatives market in Europe, we have a large team that develops indexes and there are teams working on all trade data and on retail investing. That international aspect makes it fun and interesting to work here. What also helps is that we are growing organically as well as through acquisitions, and that the newspapers are full of news about trading and stock exchange listings. Moreover, we have a very international team, which is also growing. Besides Euronext, Amsterdam is highly attractive to many people. I often hear that it is the most beautiful city in the world to live in.’
Euronext will present its new strategic plan in November. What are the main challenges?
‘We must continue to invest and innovate in order to respond to technological developments, evolving legislation and regulations, globalization, sustainability requirements and the emergence of alternative trading platforms. Moreover, we are not only a stock exchange company; we also take care of the entire post-trade transaction administration and offer all sorts of corporate services. The new strategy sets out our position on all of these market developments and how we respond to them given our growing role in the value chain.’
This interview was published in Management Scope 09 2021.
This article was last changed on 27-10-2021