Between 1986 and 2009 there were 230 listings and public offerings on the Spanish stock exchange worth €85 bn, according to the Report on Initial Public Offerings and Listings, presented today by BME.
The report describes Spain’s extraordinary economic development over the last 25 years, with GDP that has increased more than five times since 1986, the year the country joined the EU. The report highlights the importance of the stock exchange as the key driver of this phenomenon, as it channels multiple corporate activities that have made possible the transfer and secure reallocation of significant capital and equity flows.
During the presentation of the report, Domingo García Coto, Director of BME´s Research Department, stated that "there has been a transition from a financial system model in which bank intermediaries were the prevailing and almost the only source of financing to a model in which stock markets have gradually increased their weight to become key instruments in the financial system for their ability to channel investment flows to the economy and provide asset valuation at any time".
In 1986, the market value of listed companies, or capitalisation, stood at €39 bn. This figure increased by 28 times in 2009 to €1.1 trillion in 2009, posting a cumulative average annual growth rate of 15.7%, double that of Spain´s GDP. As regards Equity trading volume, it increased exponentially, from €12.6 billion in 1986 to €897 billion in 2009.
The objective of the report is to review and analyse those market-based capital raising processes and to make it clear that for any company, listing on the stock exchange is a crucial decision and one that has a clear beneficiary: shareholders. Companies need equity to finance their investment processes and shareholders benefit from the liquidity, objective pricing, knowledge of latent capital gains and greater protection.
The report also highlights the additional advantages a listing has for companies, such as the creation of shareholder value, enhanced reputation, visibility and the added supervision that public scrutiny brings. All this drives the company’s expansion and innovation in the form of new clients and access to financing.
Three stages in the history of listings in Spain
Three stages now finalized are clearly identified in the report, along with another that started in 2008 and is ongoing. During the first stage (1986-1995), described as the take off of the new Spanish stock exchange, 128 transactions took place worth €11bn. The figure is important given that at the end of this sub-period the capitalisation of the stock exchange stood at €122 bn. This stage is the most prominent in the history of the Spanish stock exchange in terms of new listings.
The second stage’s five-year period (1996-2000) represented the genuine golden years. The rapid process of convergence that preceded Spain´s joining the Euro significantly boosted activity on the Spanish stock exchange. The stock exchange became a social phenomenon, driven by outstanding price performance and a high volume of public offerings, carried out to a large extent by state-owned companies that were being privatised at the time and which attracted a large number of both retail and institutional investors.
The outcome is revealing: in barely 5 years there were 63 initial public offerings worth over €50bn (€800 million per transaction on average). The year 2000 marked the end of this stage, which ushered in what was known as the bursting of the "dotcom bubble".
The third stage (2001-2007), coincided with the new century and the sharp correction of IT stock prices, which in one way or another affected all listed companies. The dotcom crisis was exacerbated by the New York terrorist attacks of September 2001, the US corporate scandals and monetary crisis in Argentina and Brazil. These events mark the start of a long process of stock price recovery that lasted until 2007, when the subprime crisis erupted. This period saw 35 listings and public offerings worth €23bn, each of which represented an average value of €641 million.
According to the report, the year 2008 can be considered the beginning of a new stage that continues in 2009. This period includes the historic public offering of the Caja de Ahorros del Mediterráneo (CAM), which was the first savings bank to list participating shares (cuotas participativas) on the market. The year 2009 also brought other important announcements: the Mercado Alternativo Bursátil (MAB) for growth companies, designed to help small and medium enterprises to gain access to the stock market.
In terms of the economic sectors represented by the companies that carried out the listings and public offerings analysed in the report and under the current stock exchange classification, Petrol and Energy was the sector where share sales represented the highest value, a third of the total, at 32.7%, followed by Financial Services and Property, at 27.2%. Consumer Services, Technology and Telecommunications all represent percentages of over 10%.