PISCES Deep Dive: IPO incubator or private market catalyst?

PISCES has been a long time coming. Private markets are notoriously illiquid, making it difficult for investors or company shareholders to exit their positions and reevaluate their allocations.

The PISCES framework will enable platform operators to sign up and operate their own private asset exchange. This will give investors the opportunity to buy and sell shares in private companies using the platform on an intermittent basis (i.e., ad hoc, monthly, quarterly, or annually). The goal of all this is to grant private companies access to a broader range of investors, providing critical windows of liquidity and boosting the amount of funding available to them. In the process, this is intended to speed up companies’ journeys towards an IPO.

There’s a lot riding on this. London’s capital markets have been struggling for some time, suffering losses to other stock exchanges, such as New York, as companies seek higher funding. Wise, Ashtead and Just Eat mark some of the key delisting blows, and just recently, Scottish Widows also announced more bad news with its plans to significantly slash allocations to UK equities.

Within this context, a successful PISCES framework that can propel private companies towards a listing through greater access to funding could be a vital asset in fixing London’s listings problem. However, PISCES has sparked controversy around the effectiveness of this plan. The government wants the framework to serve as an IPO pipeline for the London Stock Exchange (LSE), but many experts argue that it will only worsen the problem.

The good

PISCES is a great example of action being taken where it is direly needed. Up until recently, the LSE was one of the world’s most prestigious exchanges, and incoming domestic and international investment not only boosted the growth of listed companies but also the broader UK economy.  Its current state has hugely negative effects that ripple throughout the economy, impacting the job market and London’s competitive standing as a global financial centre.

The financial and business sectors, regulators and government have all come together in an attempt to solve this issue through PISCES. The platform will provide institutional investors with greater access to some of the most exciting new companies in the UK, thereby supporting their confidence in investing. High-net-worth individuals with a minimum of £250,000 in investable assets will also be eligible to invest, as will sophisticated investors. Meanwhile, existing employees will have the option to sell shares they own in the company, providing them with easy access to liquidity, in addition to the ability to reinvest.

With all these avenues for funding opening up for private businesses, PISCES proponents hope that it will bolster their growth and development, pushing them further along the road towards an IPO. In turn, this will help put London’s capital markets back on course with new listings, boosting investment in UK companies, supporting broader economic growth, and helping to create jobs.

It’s a bold plan. Simon Walls, Executive Director of Markets at the FCA, said it himself: “This bold design rebalances risk, but it is bold risk taking that made the UK the leading financial centre it is today.”

The bad

Part of the problem with London’s capital markets isn’t just that companies are moving their main public listings to other stock exchanges; it’s that companies aren’t going public at all.

Private capital markets have experienced significant growth over recent years, reaching $14 trillion in assets under management (AUM), with this figure expected to increase to as much as $25 trillion by 2030. With significantly more funding available in private capital markets, companies seeking to raise capital have a strong alternative to the traditional public markets route.

Whereas many organisations would have looked to an IPO to increase their funding and capital as they grow, private markets now make this route, to put it bluntly, look like a pain in the neck. Listed companies are required to publish a detailed FCA-approved prospectus, maintain ongoing obligations, including compliance with the UK Corporate Governance Code, and ensure regular financial reporting for investors. Moreover, listing costs are high, encompassing payments for legal counsel, accountants, and auditors, all before incurring investment banking fees for underwriting and pricing. The entire process can take six to twelve months, and after all this, companies will also have to pay a substantial annual fee just to remain listed.

In comparison, the private route is a walk in the park; no extra fees, no added complications, just streamlined access to funding. This means that companies are now compelled to remain private for much longer, resulting in huge behemoth companies, such as Revolut, that have still not gone public.

But where does PISCES come into all this? Well, the FCA has been open about the fact that PISCES caters to this higher demand for private funding, stating that ‘As companies choose to stay private for longer, there is demand for investors to trade private company shares easily and efficiently in an organised marketplace.’ Catering to this demand, however, could be the downfall of the new framework.

By enabling companies to easily access private funding, organisations could be further discouraged from listing publicly after seeing how easy it is to just stay private. This would be great for the UK’s private markets space, inviting huge injections of capital and growing the country’s private ecosystem. However, as beneficial as this may be, in this case, PISCES wouldn’t solve the problem of driving more listings and funding for UK public markets, potentially digging us into a deeper hole.

The ugly

Further criticism of PISCES has arisen from its decision to eliminate requirements for disclosing information, including litigation, forecasts, business strategy, 12-month objectives, and sustainability standards. Some argue that this will create an unregulated market that bypasses established trading standards and invites criminal activity.

However, proponents argue that leaving disclosures and standards deliberately loose is the whole point. Private companies are not obligated to disclose such information, and forcing them to do so would interfere with the functioning of private capital markets. If private companies had to jump through the hoops of higher regulation and information disclosure, then it would erode the fabric of being a private company and too closely resemble a public listing.

An optimistic outlook

Despite its critics, PISCES represents an important and timely evolution in the UK’s capital markets infrastructure. At a time when private markets are thriving and public listings have lost some of their appeal, the FCA has chosen to meet the market head-on, offering flexibility, innovation, and a new route to liquidity that reflects how today’s companies raise capital.

Whether PISCES is the silver bullet to London’s listing challenges remains to be seen, but it is undeniably a bold and proactive step forward. If London wants to retain its status as a global financial centre, it needs fresh thinking and measured risk-taking. PISCES signals that the UK is willing to adapt, experiment, and solve problems. This, in itself, is a powerful foundation to build from.