8 March 2017 – Invertia
The deadline that the Alternative Investment Market set for Socimis to demonstrate greater liquidity in terms of their share capital, is looming. By Friday, at least €2 million of the respective share capital of those entities must be held by minority shareholders in each case. Any Socimi that fails to comply with this requirement will be expelled from the alternative stock market.
Last year, the Alternative Investment Market (MAB) produced a circular, which, amongst other things, sought to increase the liquidity of the shares of its Listed Real Estate Investment Companies (Socimis). The Socimis represent a very important segment in this small MAB market, but the negotiation of their shares stands out for all the wrong reasons – due to its absence. Having said that, it should be noted that the large Socimis, which are listed on the continuous stock market – including the one company that trades on the exclusive Ibex, namely Merlin – do have more than acceptable movements in their shares.
In this way, a significant difference is being established between the 31 Socimis whose shares are traded on the MAB and the four whose stocks are listed on the continuous market. In addition to Merlin, the group of Socimis whose shares are actively traded comprises: Axiare, Lar and Hispania.
Friday represents the deadline for all of the Socimis to comply with the minimum capital distribution requirements, whose aim is to generate more liquidity (…).
Article 3.2 of the MAB’s circular states that: “In the case of Socimis, for the shares of such a company to be traded on the MAB, a minimum number of those shares must be owned by shareholders that hold less than 5% of the company’s share capital, and that minimum number must comply with either one of the following magnitudes:
– An estimated market value of €2 million.
– 25% of the shares issued by the company.
The calculation above will include shares placed at the disposal of the liquidity provider to perform this function. The effective diffusion of those shares should happen within a maximum period of one year following their incorporation onto the MAB”.
The MAB established a period of one year for the Socimis to adapt to this shareholder composition requirement. In other words, Socimis that were operational on 9 March 2016 and before, must comply now (by Friday) and those that have joined since that date will have one year to comply following their incorporation onto the market.
The Socimi Paradox
Socimis first emerged in 2013, boosted by a very favourable tax treatment of 0% in terms of Corporation Tax. The reason, according to the experts, was to revive the real estate market that attracted so many overseas investors to Spain in search of bargains that the real estate crisis had left behind.
In this way, the Government was trying to strengthen the real estate investments of large families with a very advantageous tax vehicle. (…).
Nevertheless, most of the Socimis are owned by wealthy families and companies owned by very few people, which are achieving remarkable savings in terms of Corporation Tax. This means that in many cases, it does not make sense to sell shares in these Socimis given that their founding owners do not want to offload those shares. Nevertheless, the entities are required to be publicly listed with the aim of ensuring that company information is generally available. The act of listing forces these companies to be more transparent in terms of information.
However, Friday’s deadline for the MAB’s circular could force some of the Socimis out on the street and therefore, losing their tax benefits. (…).
Original story: Invertia
Translation: Carmel Drake