PISCES: a new horizon for private equity exits?

The corporate community will always welcome new avenues and mechanisms to facilitate investment in private limited companies, but what is interesting about the launch of the Private Intermittent Securities and Capital Exchange System (PISCES), is that it could provide an alternative forum for the secondary trading of those shares.

While much of the early commentary has focused on regulatory and tax implications, the potential impact on private equity (PE) exit strategies also deserves a closer look.

The corporate perspective

Traditionally, PE firms have relied on three primary exit routes, which each have their merits, but also limitations:

*          trade sales – a well-established exit route providing the most versatility, though in recent years valuations have been hotly contested, and deals have been taking longer to execute.

*          secondary buyouts – deals of this nature can align the selling and acquiring PE firms helping the selling PE firm to realise a return for the fund and the acquiring firm to deploy funds and take the target company to the next level. However, the makeup of the management team may or may not lend itself to another bite at the PE cherry.

*          IPOs – With only 12 IPOs on the Main Market and AIM in the first nine months of 2025, it’s not surprising that this is the least used option; the regulatory burden and market conditions/volatility can be limiting.

If all else fails, a continuation fund from the same PE firm might acquire the asset. With there being a limited number of tried and tested exit routes, could PISCES be a compelling alternative? The five-year sandbox that PISCES will operate in will be informative to the market, as we will get some insight in to how it is being used. As companies will be able to select the parameters of the trading windows and open them intermittently, it will be interesting to see how potential acquirers/investors interact with the platform. While PE firms are unlikely to see this as a full exit solution, it could give them the opportunity to sell down some of their stakes, perhaps in some of their assets which are not performing to expectations. This in turn might relieve some of the pressure to generate returns to the funds and allow the investment to continue until the financial conditions of the company or market conditions improve. Another potential use of the platform could be to help benchmark price prior to a sale or an IPO. This is pure speculation, however, as PISCES would need to offer a tool that currently isn’t available to PE.

Public sentiment in the market (including the BVCA) seems to be one of cautious optimism. Speaking to others privately, there is scepticism as to whether this “new” approach will be adopted by serial transactors. Some crowdfunding platforms (which are not too dissimilar in principle to PISCES) already offer secondary markets, though liquidity can still be an issue as logic would dictate that the platforms need to be heavily subscribed to generate the numbers necessary to have an active trading platform; a criticism of AIM is that there is limited liquidity and that is publicly traded and accessible. So, what do we know about PISCES?

PISCES – the regulatory framework

At a high level, PISCES is a framework that allows for the secondary trading of shares in private companies. It allows PISCES Operators to host PISCES platforms to facilitate existing shareholders in private companies to trade their shares on an ‘intermittent’ basis. Intermittent in this context means occasional, not frequent and of limited duration or in the eyes of the Financial Conduct Authority (FCA): monthly, quarterly, annually or on an ad-hoc basis. 

PISCES is a controlled environment in the sense that PISCES companies will be able to determine elements in respect of the trading of their shares, including at least one of the following: when the shares may be traded, the persons/categories of persons who may buy the shares, restrictions such as minimum price and the persons or categories of person who may receive information on the company or transactions in its shares. 

The FCA published final rules on PISCES which came into force on 5 June 2025 and established its legal framework. PISCES is currently established as a sandbox (meaning the regulatory framework is being tested by the FCA and Government); the sandbox period will run for five years during which time HM Treasury and the FCA will monitor the arrangements and decide whether to transfer PISCES into permanent legislation. Entities hosting a PISCES platform (PISCES Operators) can test out their business model during the sandbox period. 

To apply to become a PISCES Operator, a firm must be a UK recognised investment exchange or be established in the UK with Part 4A Financial Services and Markets Act 2000 (FSMA) permission to carry on one or more of arranging deals in investments, operating a multilateral trading facility or operating an organised trading facility. 

Prospective PISCES Operators must apply to the FCA for a PISCES approval notice, known as a ‘PAN’. The PAN application process is relatively lengthy requiring an operator rulebook, business plan and costs assessments (among other elements). The FCA offers feedback and support offered to prospective PISCES Operators before formally applying for a PAN. 

In August, the first PISCES Operator was granted a PAN; the London Stock Exchange (LSE) is now approved to operate a PISCES as a sandbox entrant known as the Private Securities Market (PSM). Picking up on the crowdfunding theme, Crowdcube will be a Registered Auction Agent for the PSM, meaning Crowdcube members will be able to invest in shares auctioned on the LSE’s PISCES venue. Currently, it is not known which companies have registered on the platform, though the first trading events are expected soon.

PISCES shares can be made available to institutional (professional) investors and high net worth and sophisticated retail investors only. Such retail investors will need to complete certificates similar to or the same as those required under the FSMA (Financial Promotion) Order 2005 (FPO). 

As for financial promotions PISCES companies will need to bear in mind the FPO when promoting shares in PISCES companies. A new exemption has been created for required disclosures made before a trading window opens, though these disclosures must still include risk warnings. Because PISCES shares are considered ‘unlisted’, PISCES companies and third parties are able to rely on the exemptions for promotions to high net worth and self-certified sophisticated investors, meaning the participants who can access the platform link into those who may be promoted to about such PISCES shares.  

While there is no requirement as to a formal prospectus for PISCES shares, PISCES Operators must ensure that PISCES companies make certain ‘core disclosures’ ahead of trading windows such as financial statements and business overviews, as well as the price parameters set for the trading event. An additional overarching requirement is imposed on PISCES Operators whereby they must have in place disclosure arrangements that are appropriate for the efficient and effective functioning of its market. 

The UK Market Abuse Regime does not apply to PISCES, however PISCES Operators must take steps to monitor that no misleading statements are made under the market manipulation regime in the Financial Services Act 2012 (and these must be reported to the FCA, if discovered). The statutory liability regime still applies, meaning directors and selling shareholders could face claims for misleading or inaccurate disclosures. 

As is always the case, shareholder agreements and company constitutions will need to be carefully drafted to allow for this new avenue for share dealing, but concepts such as drags and tags will remain as important as ever. Pre-emption rights and restrictions on share dealings will need to take account of the auction windows.

The tax position

There is exemption from all stamp duties (including SDRT) for the transfers of a PISCES share in connection with trading activity that takes place on a PISCES platform under the PISCES sandbox arrangement. The legislation that provides this exemption came into force on 3 July 2025 (under the Private Intermittent Securities and Capital Exchange System (Exemption from Stamp Duties) Regulations 2025). 

In relation to existing tax advantaged share options (granted under EMI and CSOP), the Government published a written statement on 15 May 2025 that legislation will be included in the next Finance Bill to allow employers, with their employee’s permission, to amend existing EMI and CSOP options to include a PISCES trading event as an exercisable event, without losing the tax advantages those options offer. This legislation will have retrospective effect and is to be welcomed. 

This treatment applies only to existing CSOP and EMI option contracts where all the following conditions are met:

• the date of grant is before Royal Assent of the Finance Bill 2025–2026

• the date of the variation of the option is on or after 15 May 2025

• the sole effect of the variation is that, if the shares are or become PISCES shares, the option may be exercised (to any extent), but only if the shares are then immediately then sold on a PISCES platform

• the variation is agreed by the employer and employee option holder in writing. 

The reality

PE firms (and the rest of the deal doing community) will watch the evolution of the platform with interest, but it will be some time before we know whether the theoretical attractive flexibility of the PSM will result in a material change for PE firms when it comes to those three (but mainly two) exit routes. While it is a coincidence that the PISCES platform shares its name with a sign of the zodiac (where the two fish represent a struggle between fantasy and reality), industry professionals will be hoping that the reality lives up to the fantasy.