ARGENTINA Law and Practice Contributed by: Manuel Tanoira, Lucía Rivas O’Connor, Luis Merello Bas and Dolores Nazar, TCA Tanoira Cassagne
look for international exchanges, like the NYSE or NASDAQ for IPOs. 6.3 Pre-IPO Liquidity Secondary Market Trading and Liquidity Challenges in Argentina Argentina needs secondary market for liquidity, but strict Comisión Nacional de Valores (CNV) rules, market volatility, and a risk-averse culture stall progress. Private funded companies offer an alternative, yet legal limits keep trading infor - mal. Many start-ups target US listings or Brazil’s BOVESPA for better liquidity options. In Argentina, there is a tangible need for a sec - ondary market to facilitate liquidity, particu - larly for early-stage investors and employees. However, several challenges prevent this from becoming a reality. • Regulation: The main hurdle is the regulation surrounding public offerings of securities. The CNV has stringent rules that prevent start-ups from offering shares publicly unless they go through a lengthy and bureaucratic process, which is not ideal for the fast-paced nature of start-ups. • Volatility: The Argentine market is highly volatile, which further discourages second - ary market trading. Investors are reluctant to participate in a market where liquidity is low and risk is high. Without a public offering, it is difficult to create a secondary market with enough volume to attract substantial invest - ment. • Cultural issues: There is a lack of investor culture in Argentina, with the public typically investing in low-risk ventures. The desire to gain substantial returns in a short period of time (eg, a small investment turning into mil - lions) contributes to this issue.
A potential solution could be programmes like the Plataformas de Financiamiento Colectivo (PFCs), which are similar to trust-based port - folios. In this structure, the fund manager acts as the fiduciary, and it allows investors to sell their shares under certain conditions. While this could address some liquidity concerns, the legal restrictions around public offerings of securities make these secondary transactions informal and not part of a formal market. Many Argentine start-ups aim to go public in the US market, where there is greater valua - tion potential and a more robust capital market. Brazil also has a more developed capital market with BOVESPA, making it easier for companies to provide liquidity options for their investors. There is a clear demand for a secondary market in Argentina, but due to regulatory restrictions on public securities offerings, this market remains informal and underdeveloped. More facilitation of secondary liquidity programmes would help, but without changes in the regulatory frame - work, the market will continue to face significant barriers. 7. Regulation 7.1 Securities Offerings Legal and Regulatory Considerations Rules governing venture capital offerings The Comisión Nacional de Valores (CNV) over - sees private securities offers, but Argentine start-ups rarely list locally. In practice, most entrepreneurs in Argentina do not list their com - panies on the local market. Instead, their IPOs are usually governed by SEC regulations from the United States, not by the CNV.
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