The EU Cleantech Scale-up needs a Credible IPO Route

Scaling up the EU’s clean technologies is key to the EU’s future climate and industrial leadership. The International Energy Agency estimates that 50% of the emissions reduction needed to get to net-zero by 2050 will come from technologies currently at the laboratory demonstration stage.

This scale-up is particularly capital-intensive. The capital needs to come from the private market (venture capital and private equity) and public markets.

Today, EU cleantech SMEs are struggling to raise money on public capital markets. As laid out in our Annual EU Cleantech Briefing, while EU cleantech companies attracted 26% of global trade acquisitions in 2021, they only raised 7% of global cleantech IPO money over the same period. There are few success stories of EU cleantech IPOs, despite some early activity on the NASDAQ First North Growth Market. As a result, the EU is losing out to other regions when it comes to scaling clean technologies.


The Capital Markets Union project (CMU) provides an opportunity to improve these conditions, and make sure our innovative companies can list and access the financial markets they need to scale.

In the below, we outline current challenges for listing cleantech SMEs, and our proposals to improve the situation.

Challenge 1: Not enough demand for small cap stocks, and lack of dedicated equity research

In the EU, technology SMEs do not attract large trading volumes. While US companies listing on the NASDAQ enter an ecosystem of equity research, institutional investors and retail investors, EU investments are much more concentrated on blue-chip, large corporates. As attested by the regulatory framework, the EU’s large investor profile is highly risk-averse, less prone to investing in new technologies.

Large mutual fund managers, who typically buy large share blocks in IPOs, do not invest in small caps because of small ticket sizes and large-cap focused culture. Dr. Christian Reitberger, partner at Germany-based Matterwave Ventures, indicates that: “Large mutual funds in Europe shy away from investing in small tech stocks. US mutual funds also avoid EU companies, because they don’t see their European counterparts committing.”

This problem is compounded by the absence of equity research focusing on cleantech stocks. Large investment banks lack the financial incentives to cover small-cap tech stocks, given low trading volumes. This creates a vicious circle, where large buyers don’t invest for lack of research. ESMA reports that market participants have indicated that the MiFID II research unbundling provisions may have disproportionately affected SMEs. A number of SMEs now have to pay independent research providers to write equity research and take the initiative in approaching investors directly. 

A result of these various dynamics, the best EU cleantech companies have not tried to list on exchanges, preferring get acquired by large corporates at an earlier stage. This often limits their growth potential, and prevents us from building European Tesla-style success stories.

Proposal 1:
Develop a pan-EU program to finance cleantech small-cap equity research, providing incentives for research houses to specialise in low-carbon innovation and technology, with the goal of kick-starting demand for these stocks. This could be done via Horizon Europe funding, or public-private partnerships between the EU and large financial institutions.

Challenge 2:
Listing requirements are not proportionate for cleantech SMEs

Despite recent efforts to streamline listing procedures for SMEs, the level of information required in an IPO prospectus is still very onerous for SMEs. A 2019 report commissioned by the European Commission outlines that in the EU, prospectus length is still not proportionate to the size of the company, stating that “the average prospectus length for a company valued at less than €150m was only a third shorter than that for one valued at more than€1bn”. Prospectuses for SMEs, including the EU Growth Prospectus, could be further simplified to achieve their goal of helping SMEs access capital markets faster.

Nordic Alpha Partners, a leading cleantech venture capital firm active in the Nordics, recently listed two companies in the EU, one on a growth exchange (Nasdaq First North) and another on a traditional exchange (Copenhagen Stock Exchange). Rasmus Lund, partner, reported that, “while the requirements were lighter on the growth exchange, in proportion it represented a huge effort for a small company, with a significant share of company resources being allocated to the listing.”

Proposal 2:
Introduce a proportionate prospectus for SMEs requiring information which strictly has a significant impact on the SME


Challenge 3: SPACs are still to be defined in the EU

The global rise of listings by reverse mergers, via Special Purpose Acquisition Vehicles (SPACs)could be an opportunity for cleantech SMEs to gain better access to public markets. SPACs offer a cheaper alternative for early-stage companies to go public. A SPAC raises capital through an IPO for the purpose of acquiring an existing company. Afterwards, the acquired company merges with the publicly-traded SPAC and becomes a listed company without having to undergo the listing procedure itself. SPACs can raise public equity funding for companies that may not have a clear IPO route but could use the capital to scale faster.

A number of US-based cleantech companies have used SPACs to go public. Recently we have seen examples of EU cleantech companies being acquired by US SPACs, such as Wallbox, a Spain-based developer and manufacturer of electric vehicle (EV)chargers. Wallbox recently listed on the New York Stock Exchange via a SPAC merger. However, US listing requirements make it hard for EU companies to comply, and they often need to restart their accounting in IFRS standards. As a result, the US is once again gaining a strong capital advantage, with many of their cleantech rising stars being able to finance themselves on public markets, while EU markets remain timid.

Currently, there is no EU-wide legislative framework regulating SPACs. Member States are adopting their own legislative measures on SPACs. This is an opportunity for the EU to design new rules taking into account the risks related to SPACs, but also providing new opportunities for SMEs to access capital markets. Fabio Lancellotti, partner at France-based Aster Capital, agrees: “Putting in place an EU framework for SPACs would help raise substantial amounts of new capital to deploy toward helping the EU lead the race to net zero.’’

Proposal 3:
Propose an EU legislative frameworks for SPACs, making it easier for SMEs to list via reverse mergers

These proposals would allow the EU to maintain a high level of investor protection while ensuring a level playing field and an innovative approach to listings regulation.

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