(News Bulletin 247) – For greater readability, the Paris Stock Exchange is subdivided into several compartments depending on the market size of the company or the wish of a company to be subject to more or less flexible regulations. But other compartments, much more confidential punctuate the life of the Parisian stock market.

As regular readers of News Bulletin 247, over time you have become knowledgeable about the Paris Bourse and how it works. The editorial staff of News Bulletin 247 therefore teaches you nothing by explaining to you that Euronext Paris is broken down into two main compartments. But a booster shot never hurts… On the one hand, we find the main regulated market of Euronext Paris in which the largest French companies and companies whose stock market weight is a little more modest coexist.

This regulated market is itself subdivided into three compartments, classified according to the size of the companies of the listed securities: Euronext compartment A which welcomes companies weighing more than one billion euros in capitalization, Euronext compartment B for companies capitalizing between 150 million and 1 billion euros and Euronext compartment C for companies whose capitalization is less than 150 million euros.

At the same time, the stock market operator has created non-regulated market compartments: Euronext Growth, and Euronext Access, which house companies wishing to finance their growth on the financial markets, without going through the traditional compartment of the regulated market of Euronext Paris. .

The Sanctions Compartment

But do you really know all the compartments of Euronext Paris? Recently, the Boostheat company got acquainted with the sanctions compartment. The stock market operator Euronext had placed the securities of the Lyon group in this compartment on June 1, in application of one of the provisions of the regulations valid for listed companies.

Each listed company is in fact required to comply with periodic information obligations, with more or less flexible rules depending on the compartment in which its securities are admitted to trading. And every year, a handful of issuers take the risk of being slapped on the fingers by the Autorité des marchés financiers (AMF) and/or the market operator Euronext, which happened to Boostheat.

The Lyon-based company had indeed not published the financial elements requested by Euronext within a given time, which led the stock market operator to take action. It was penalized for failure to meet periodic obligations, namely the failure to publish the annual report, auditors’ report and management report within four months of the end of its financial year.

And if the laggard company doesn’t correct the situation quickly, a battery of escalating penalties can be instituted. Initially, Euronext publishes and disseminates the names of companies whose publication is overdue (“naming & shaming”) to inform all market participants and the company itself of this decision. It leads to the transfer of the securities of the latecomer company to the sanctions compartment or “penalty bench”.

“We will place the securities in the sanctions compartment, to isolate the company which has breached its obligations from other issuers in good standing. The aim is to protect market participants”, explains Damien Pelletier, director of admissions at Euronext Paris. Hence the notion of “penalty bench” or putting on the bench in the language of Molière.

This is therefore the first step in the range of Euronext sanctions. If this banning is not sufficient, financial penalties may be imposed depending on the situation of the company. The market operator can also temporarily suspend the quotation of the security before going up a notch and pronouncing a possible delisting. The AMF is also likely to take legal action to obtain from the court an injunction to publish under penalty.

This penalty is reversible if the late issuer complies with the rules laid down by the Euronext market operator. This was the case for Boostheat, which in the meantime managed to publish its 2022 annual financial report on June 21. And its securities are once again admitted to trading on its original compartment, namely that of Euronext Growth.

“The allocation of a security to the sanctions compartment ends at the request of the issuer, or on the own initiative of the competent Euronext market operator, provided that the issuer has remedied the breach in meeting the conditions required by the competent Euronext market operator for the reintegration of the securities into the normal compartment of the listing”, recalls the stock market operator.

Among these compartments little known to the general public, we can also cite that of “Collective Proceedings”, a specific compartment within which Euronext groups listed companies subject to collective proceedings (safeguard proceedings, receivership proceedings or judicial liquidation ). Admission to this compartment of collective proceedings “is not linked to a sanction, but to a judicial decision”, recalls Damien Pelletier.

“The relevant Euronext market operator may decide to list a security in the Insolvency Proceedings compartment when the issuer is engaged in an insolvency proceeding as provided for in Council Regulation (EC) number 1346/2000 of May 29, 2000 relating to insolvency proceedings, as in force, or any equivalent procedure”, indicates Euronext.

The AMF recommends that the listed company inform the market of the opening of such a procedure and communicate the provisional timetable, as well as any deadline related to this collective procedure.

It should be noted that admission to this compartment does not result in the automatic suspension of trading in the securities of the company concerned by collective proceedings. And insofar as “such a suspension was previously in force, trading would resume from the registration in the insolvency compartment”, specifies Euronext.

As with the sanctions compartment of Euronext, the allocation of a security in the insolvency compartment ends at the request of the company concerned or Euronext, provided that the company is no longer engaged in insolvency proceedings.

In 2022, 11 companies on Euronext announced insolvency proceedings, compared to only 6 in 2021, indicates Marc Karako, Managing Director at Park Partners at Daf-mag.fr. And the specialist expects a sharp increase in the number of insolvency proceedings initiated in 2023 due to the end of state aid linked to the health crisis.

The compartment of the pros

Another compartment, also little known to the general public, is the playground of very specific profiles. At the end of 2007, Euronext Paris set up a professional compartment to enable issuers to admit their securities to a regulated market without issue or sale to the public.

This compartment was originally created to facilitate the listing of foreign companies wishing to acclimatize to the Parisian market. “It’s a market suitable for foreign companies that are looking for additional exposure, notoriety”, abounds the Euronext Paris specialist. The market capitalizations of these companies may lead them to be referenced, for example, in compartment B of Euronext. However, individuals cannot position themselves directly on these securities.

As its name suggests, it is aimed at so-called qualified investors, ie an informed public aware of the risks it incurs in venturing into this very specific compartment. A natural person can legitimately ask to be registered in a file held by the Autorité des Marchés Financiers. But it is not “Mister and Madam everyone” who is authorized to pass orders there. The financial market watchdog must ensure that the investor has in-depth knowledge of investing in financial instruments, that he has a well-stocked portfolio and/or that he carries out a specific number of transactions over a period of time. well-defined time.

And what about the companies present in this compartment? This compartment houses “securities which have been admitted to listing without a public offering, such as SPACs or by direct admission”, specifies Damien Pelletier. According to information provided by Euronext Paris, six companies are currently listed on this compartment, only one of which is foreign, namely the telecommunications specialist Aerkomm, which arrived in July 2019, via a direct listing. The number of foreign companies evolving in this compartment is reduced to a trickle since very recently, one of its former residents made the decision to leave the Parisian place.

At the end of June, the Atorum company indeed wished to put an end to its listing on Euronext Paris, taking into account the volumes exchanged, and the administrative costs induced by its presence on the Parisian market. However, the company maintains its listing on the Nasdaq in the United States. The five other companies listed on this compartment are SPACs, companies with no operational activity that raise funds on the stock market with the sole objective of making one or more acquisitions. Or companies that went public through a merger with a SPAC.

The companies that have invested in this compartment are as follows: Teract – which had at one time considered a merger with Casino before retracting -, Transition, the first European SPAC dedicated to the energy transition, Dee Tech dedicated to the technology sector, Eureking specialized in the manufacture of biopharmaceutical products and finally Deezer, which is celebrating its first candle as a listed entity this week. All of the companies mentioned all arrived on Euronext Paris between 2021 and 2022, at the height of the market’s enthusiasm for these investment vehicles.

The flexibility of this compartment lent itself favorably to the arrival of the SPACs, because the latter are exempted from the cumbersome and complex process of a traditional IPO. In April 2016, the arrival of Mediawan on Euronext Paris caused a sensation. It was then the first IPO of a SPAC in France and raised 250 million euros on this occasion. Four years later, the production studio set up by Pierre-Antoine Capton, Xavier Niel and Matthieu Pigasse was the subject of a takeover bid by its founders.

Without definitively turning its back on the stock market as was the case for Mediawan, another way is possible to get out of the professional compartment. The company can go on the traditional market of Euronext Paris and launch on this occasion a public offer (issuance or sale of securities) with the drafting of a prospectus, approved by the AMF. In April 2021, Aerkomm expressed the wish for such a project and wanted to join compartment C of Euronext Paris. This project has remained a dead letter since…