Capital Markets - Malta

In Malta, it is commonplace for businesses to rely on bank financing as their primary source of funding. However, the avenue of capital markets offers an alternative which ensures that funds may be raised without opting for traditional means. Capital markets in Malta offer companies the opportunity to raise funds by either issuing shares (equity) or bonds (debt securities) to investors. The Malta Stock Exchange (MSE) ensures the smooth running of such activities, placing emphasis on the facilitating of listing and trading of financial instruments. Capital markets offer businesses the opportunity of choosing from a wider array of investors, therefore significantly reducing reliance on traditional banking institutions in the search for funding.

Even though the concept of capital markets and listing may be considered a risky endeavour, due to the potentially high costs and market volatility associated therewith, listing on the MSE offers a wide array of benefits to companies, aiding in ameliorating the company’s overall position. A few of such advantages include:

1. Access to Long-Term Funding: bank loans often carry with them potentially cumbersome repayment conditions. On the other hand, capital markets allow companies the time and space required to develop a sane financial health which stands the test of time;
2. Diverse Funding Sources: Over-reliance solely on bank loans carries the risk of businesses being exposed to fluctuating interest rates and heavily restrictive lending conditions. Capital markets offer an alternative, helping businesses reduce financial risk considerably;
3. Saving Costs: Capital markets often offer cost-effective trading options, even if initial costs may, at first glance, appear to be high. Bonds, for instance, often carry lower interest rates when compared to bank loans, and this becomes even more relevant when the company or firm in question is in a stable financial position.
4. Enhanced Credibility: When a company is listed on the MSE, its credibility increases as a direct result of such listing. This considerably ameliorates its chances to come across attractive investment opportunities. Moreover, raising funds through capital markets does not always demand the placing of collateral in exchange, offering businesses with limited tangible assets a better hand at successful investing.

Malta has seen growing interest in capital market financing and listings on the MSE’s Prospects MTF - a multilateral trading facility specifically tailored for SMEs – which are  consistently on  the rise. Moreover, regulatory initiatives and financial incentives are tailored to encourage more businesses to explore capital market solutions.

While bank finance continues to dominate the financial landscape in Malta, the realm of capital markets is undoubtedly an attractive and suitable alternative. Capital markets offer  long-term funding, diversification, and may potentially also aid companies in saving costs. Even though it is important to acknowledge that strict regulatory frameworks and market challenges are associated with this alternative as well, constant and effective enhancement of Malta’s financial markets and investor base can certainly continue to make capital markets a viable funding option for businesses seeking growth and better financial flexibility.

For enquiries or assistance, please contact us at info@gtg.com.mt

Author: Karl Cauchi