The Euronext Growth Milan Market (EGM) at September 2023: A Detailed Analysis
Nicolò Scoditti - 20/10/2023

The Euronext Growth Milan Market (EGM) at September 2023: A Detailed Analysis - M&A - Mergers & Acquisitions

At the end of September 2023, the Euronext Growth Milan Market (EGM) continued demonstrating its vitality in the Italian financial landscape. According to the semi-annual analysis conducted by the Analysis and Research Team of Banca Profilo, the EGM counted 197 companies, with 27 making their debut on the stock market in the first nine months of the year. This represents a significant increase compared to the 17 entries recorded in the same period in 2022.

One of the key metrics in this analysis is the proceeds raised by companies through Initial Public Offerings (IPOs). During the period under examination, EGM-listed companies generated 278 million euros, with an average of 10.3 million euros per IPO. These figures witness the investor interest in high-growth potential SMEs in this market.

An interesting aspect is represented by the transitions of companies from EGM to other market segments. During the period under review, two companies, Unidata and Cy4gate, moved to the STAR segment, while three others, Technoprobe, Digital Value, and Comer, leaped the Euronext Milan segment. These movements highlight the dynamism and growth potential within the EGM.

An overview of the sizes of companies listed on the EGM reveals that 88% of them have a market capitalization below 100 million euros, with more than a quarter of them falling within the 10-25 million euro range. This picture is also reflected in revenue distribution, with 90% of companies generating revenues below 100 million euros and less than a quarter in the 10-25 million euro range.

However, a critical challenge that persists in the EGM is liquidity. Over 55% of companies trade less than 0.1% of their market capitalization in the average daily data of the last three months. This data underscores the need for further developments to improve market liquidity.

A positive highlight is the growth of merger and acquisition (M&A) activities in the EGM. In 2022, 42 companies completed at least one acquisition. This trend continued in the first nine months of 2023, with 39 companies concluding at least one acquisition, totaling 57 transactions (including ten transactions in the third quarter of 2023), down from the 65 transactions recorded in the 2022 fiscal year.

In relative terms, over the past year, the EGM recorded a 6% decrease, underperforming the STAR segment, which saw a 2.8% decrease but outperforming the FTSE Italy All Share, which rose by 27.7%.

In summary, the Euronext Growth Milan Market (EGM) remains a fertile ground for high-growth potential SMEs attracted by financing and development opportunities. However, liquidity remains a challenge, while M&A operations represent a strength. Vigilance and attention to future developments will be crucial for the success of companies listed on the EGM.

One aspect that deserves further consideration is the absence of the tax credit incentive for listed SMEs in the latest financial package. This incentive, which could be a significant support for companies in the process of going public, is currently not part of the adopted fiscal policy measures.

The tax credit incentive has been widely discussed as a tool to facilitate SMEs in considering the EGM as a viable financing option. This would have been particularly important in the current context, where liquidity remains challenging for many companies. The incentive could have further encouraged market access, making the decision to go public easier and supporting economic growth.

Unfortunately, its absence in the latest financial package may represent a lack of support for SMEs seeking to leverage the opportunities offered by the EGM.

It is essential that the government and financial institutions carefully assess the importance of targeted support measures for listed companies, considering their relevance to the country's economic development.

In conclusion, while the Euronext Growth Milan Market continues to thrive, it is crucial to consider all opportunities to enhance its attractiveness to SMEs further. Including a tax credit incentive would be a significant step in this direction, strengthening Italian SMEs' position in the international financial landscape.