Details of the Private Intermittent Securities and Capital Exchange System (PISCES) has now been unveiled.
Now under a month until launch, this is what UK tech needs to know about the new investment framework.
What is PISCES?
PISCES is a framework developed by UK financial regulators as an IPO-alternative for companies to openly offer shares for sale to a wide crop of investors.
Under a PISCES-backed system, private businesses can temporarily list their shares for sale, giving investors a small window to invest in a company before it is delisted again.
PISCES is not an exchange itself but rather a system of rules determining how markets of this type can operate.
Why use PISCES?
The new system allows companies to attract new capital without having to fully commit to a public listing.
Floating in London comes with many regulatory compliance rules that are often cited by listed companies as burdensome. With PISCES, firms that are not ready to go public can still reach a broad range of investors without the full scrutiny of an IPO.
The system has been billed as a way to encourage funding outside of the traditional venture capital system to go towards established scale up-stage startups either unready or unwilling to risk floatation, but that are still in need of capital investments.
Who can invest?
Though it sounds like a temporary public listing, a key difference with PISCES is that the shares sold through it are not open to the public, not exactly anyway.
Shares bought via PISCES will be limited to sophisticated and institutional investors, professionals and asset managers.
To purchase shares with PISCES, you will be required to have been issued a certificate signifying that you are a sophisticated investor who is “sufficiently knowledgeable to understand the risks associated with an investment such as a PISCES share”.
The certificate must be signed and dated by an “authorised person” and lasts three years before requiring renewal.
An authorised person is an individual or firm that has been approved to carry out regulated financial activities by the Financial Conduct Authority (FCA)
When does it start?
The PISCES regulation was laid before parliament as a statutory instrument late last week, meaning it does not require the standard legislative passage or debate.
The regulation officially comes into force on 5 June.
PISCES will begin as a regulatory sandbox run by the FCA, which will report findings and recommendations after the initial five-year sandbox period.
What do people think?
“[PISCES] will grant smoother access to private capital while giving investors access to more liquidity in private assets. Instead of building a pipeline of IPOs, PISCES will become a direct competitor to public markets,” commented Myles Milston, founder and chief executive of Globacap.
“If done right, it will catalyse the UK private markets ecosystem, unlock more capital to power investment and growth and future-proof the UK’s position as a leading financial hub.”
Ada Ventures principal Michael Tefula described the move as a “great example of UK financial innovation and the willingness to experiment with new ideas”.
“Today, if you own shares in a startup, it is hard to sell them unless the company IPOs or gets acquired,” Tefula added.
“But PISCES creates a vital additional option; enabling companies to reward founders, employees and backers without waiting for an IPO or M&A event. This is an important, much needed step forward and the Government should be applauded for their innovative thinking.”
Nick Graves, partner at law firm Burges Salmon added: “The message is definitely getting out; we can see PISCES being used by a wide range of companies including, for example, founder-led businesses with early-stage investors looking for an exit.
“The publication of these regulations demonstrates that the government’s plans for PISCES are on track.”
Read more: ‘Global interest’ in PISCES private market plan, London Stock Exchange boss says
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