The upcoming launch of PISCES, the new investment framework allowing intermittent share auctions from private companies, risks encouraging a culture of “FOMO investing”, warned Carrie Osman, head of PE advisory firm Cruxy.
The Private Intermittent Securities and Capital Exchange System, also known as PISCES, is a new scheme aimed at encouraging capital investments in companies that are not ready for a full-blown public listing.
Under the framework, private firms can temporarily offer their shares as if they were public (though only to institutional investors, no retail buyers), without requiring the long-term commitment or due diligence of a floatation.
The framework was made amid a slow period for UK public listings, with the regulatory burden and wider economic uncertainty often being cited as causes.
While the PISCES launch could support “much needed liquidity in the UK”, it could also come with dangerous “potential consequences”, Osman said.
The Cruxy chief executive warned that allowing the share value of a private company to be determined by short-term auctions that do not require the level of compliance detail that an initial public offering does could encourage ill-though out investment behaviour as financiers are hit with a fear of missing out (FOMO).
For Osman, the lack of scrutiny, paired with the time pressures of an action, mean we are likely to see a “bandwagon-jumping trend” grow that “unjustly inflate the value of companies and technologies”.
“On the flip side, businesses could also come out with a lower price per share than is fair,” Osman added.
“Determining value and price is not easy and requires in-depth sector specialism. It’s unrealistic to expect this level of expertise from companies and employees, without significant investment experience.”
The PISCES framework officially comes into force on 5 June.
Read more: PISCES is coming in June, what UK tech needs to know
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