Mesh and the future of stock exchanges

“It’s no secret that fewer and fewer listings are happening globally,” Bloem replied. “The amount of companies that are listed, and the amount of assets that are listed, are declining globally. The US equity market alone has decreased by 43% in size since 1995. And it’s a global phenomenon.”

What this means, she said, is that the space is shifting towards private capital markets. “That,” she said, “is where Mesh finds its home.”

Bloem described private capital markets as being “where you would hear your friends and family talk about venture capital and private equity”. “It’s where your high-net-worth individuals and family offices invest,” she said. “And if the people with a lot of capital are investing into this space, maybe you should take notice, and sit up and understand why this is happening.”

The Shift To Private Capital

The cost of compliance and the high barriers to entry into formalised exchanges are driving this trend, Bloem said – and it means that only the biggest companies really list on traditional exchanges anymore.

“The other trend is that companies are listing later and later in their lifecycle,” she said. “The average age of a company IPO-ing, or listing on an exchange, is 11 years now; whereas previously it was four years. This means that companies are no longer growing in the public markets. They’re growing in the private space, and only listing so that the entrepreneurs can take money off the table or get some capital out of the business. So if you’re only investing in the public markets, you’re missing out on 90% of the growth that’s happening in the market.”

This is the future of investment markets, Bloem said. “We serve the private markets, so we don’t compete with the JSE. They have their space. They should keep on taking care of the IPOs. But Mesh takes care of the private markets, where people want to raise capital within the private sector or invest in alternative assets that they cannot find anywhere else.”

The trend is clear: Bloem pointed to “more and more investors and more sophisticated investors” entering the private debt and private equity spaces. “We foresee this trend continuing,” she said. “It also runs in parallel with the trend towards tokenisation. More and more assets are being tokenised, and it’s mostly private market assets that are being tokenised and traded.”

South Africa’s leading banks – many of which have been publicly cautious around crypto assets – are also warming to the blockchain, she added. “Welcoming the banks into this space would provide our clients and our investors the opportunity to have a bank investing in their assets, or Mesh being able to distribute some of the bank’s assets to a larger network of clients.”

Ryan asked whether Mesh was trying to open up capital markets to smaller companies who would be looking to raise capital, and what the criteria would be if that were the case. “We’re looking for those fantastic and interesting entrepreneurs within the capital market space that are not yet serviced by the bigger banks and the exchanges,” Bloem replied. “We’re looking for companies that are falling within the commercial space and within their growth phase. It is our objective to keep on reducing the investment size, to open up the market and reduce those barriers to entry, to make it more effective for everyone to raise capital.”

Ultimately, though, the market will decide what it wants to invest in.

The Future of Capital Markets

A clear picture is emerging of what the future of capital markets looks like. And while a Finance 3.0 player like Mesh offers many of the same investment opportunities as the JSE (and with lower fees), Bloem does not see the platform as a direct competitor to the traditional exchange. Not yet, anyway.

“Having more and more new players entering into this market is always welcome, because the more people we can get to adopt this technology in this space, the better it is for the industry in general,” she said. Mesh will keep on expanding our global footprint, and as we expand we will offer more South African investors the opportunity to invest in international assets, and more international investors the opportunity to invest into South African companies and issuers as well. This is a massive advantage that we can offer.”

And while traditional exchanges are steadily shrinking in terms of listed companies, Mesh continues to grow. “We’re looking at partnering with more people to bring interesting assets to market,” Bloem concluded. “More specifically, we have a couple of property transactions coming up, which both institutional and retail clients will be able to participate in, and thereafter we’ll be looking to bring in more and more private credit, either in the form of funds or direct exposure, which has been sorely missing from South Africa’s retail segment.”

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