Pisces Markets: A new Risk on Opportunity Coming to the UK!

6 days ago

the Financial Conduct Authority (FCA) is gently pushing the development of mini stock markets intended to enable high-growth start-ups to raise money earlier in their life-cycle.

This is obviously a great opportunity for investors, but it also involves a more risk-on investment climate!

What Are Pisces Markets?

Pisces is short for private intermittent securities and capital exchange systems, and they are intended to be a halfway house between private fundraising and full public listing. The idea is that good private companies, especially in the technology and innovation arena, can sell small parcels of shares on a controlled platform. It offers investors a chance to back high-growth prospects "at much earlier stage," the supporters argue.

Personally I like this idea, I've come across a few start-ups I'd like to have a small vest in, but not been able to go for it because of the private deals being too high-stakes.

This could also help address a chronic British problem: the inability to scale up promising start-ups into global leaders.

The Hype: Innovation and Economic Growth

THe UK is nowhere near as supportive as the US or China is for startup worlds, and this is in part due to overbearing, risk-averse regulation. Pisces markets could unlock more capital into earlier-stage investments and will produce the next generation of "unicorns" — companies with a valuation of over $1 billion.

The Risks: Low Protections and High Stakes

Investor protections will be thin under the Pisces model. It will not resemble the usual public markets, where stringent disclosure requirements and safeguards exist. Pisces will be more relaxed. Regulators are banking on a combination of "buyer beware" labelling and so-called "grown-ups-only rule," which implies that sophisticated investors will see the risk they are taking.