SME's Access Into the Capital Market in Denmark: In the Light of New Prospectus Regulation

Ditte Jorsal

Student thesis: Master thesis


The stock market in Denmark is characterized by the listing of very large companies and only a few small and medium-sized companies (SMEs). The stock market is an effective way to raise capital via public offerings to support the growth and development of the company, hence, listed SMEs often have more successful growth that is for the benefit of investors, companies and society. A public offering will be subject to a requirement to prepare a Prospectus when offering securities. The Prospectus is a document that contains all the necessary information about the issuer of securities and enables the investor to do an informed decision on whether to invest in a particular offering or not. The EU Commission has made a revision of the Directive 2003/71/EC (Prospectus Directive). The purpose is to strengthen the source of funding for businesses, including SMEs, in parallel to the banking sector. Regulation (EU) 2017/1129 (Prospectus Regulation) will be implemented 21 July 2019. The revision of the Prospectus Directive aims to make prospectuses less of a burden to SMEs and thereby making it more attractive to raise capital via the stock market. This thesis has focused on some of the potential consequences that derive from the regulation of Prospectus and discusses whether it improves the proportionality to the offering. Due to the asymmetric information between the agent and the principal, a market failure arises. Therefore, the regulation of prospectuses is necessary to secure the needed information are giving in the prospectus and the asymmetric information equalizes. The provisions are entirely necessary in order to provide a stock market that investors can trust. The investor has to rely on the market, or else the market will become inefficient. Eugene Fama put forward his famous hypothesis, stating that the capital markets are efficient. However, the result of the analysis indicates that the Danish SME market seems inefficient at the present time. The SME market is expected to be more efficient as a consequence of implementation of the Prospectus Regulation. Finally, the thesis concludes that the simplification of the prospectus rules establishes the framework for providing shorter and more precise content of the Prospectus, but it will be up to the market players to change the practice for preparation of prospectuses. In that connection, the regulation is not ambitious enough to fully meet the purpose of the Prospectus Regulation. It will probably require a more comprehensive revision of the prospectus regime. The focus should be on how to reduce the costly processes that relates to the preparation of prospects.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
Publication date2019
Number of pages78
SupervisorsPeer Schaumburg-Müller