At the beginning of March, the Financial Conduct Authority (FCA) ruled that information on issuers in IPO processes needs to be made available sooner and to a wider range of investors.
You won’t be surprised to hear us declare that the IPO playing field is far from even; in fact, it’s this sentiment that spurred our expansion into public markets last year. It was the subject of our 2016 event and report Bridging the Equity Divide, which found that while between April 2015 and April 2016 there were more than 30 IPOs (over £100m) in the UK, only two of these had a retail tranche.
Research conducted for the report featured a survey of UK investors. Of the respondents that knew what IPOs were, almost 40% said they would have invested in an IPO had they been given the chance.
A lack of access
The news that the FCA is looking at making initial public offerings more fair and transparent by giving better information and access to investors is something we’ve been campaigning for for a long time, and it’s encouraging to see that the City has similar concerns. The following is taken from information the FCA made available following its decision:
‘Currently, the prospectus, which should be the primary source of information on companies seeking to raise finance through the IPO process, is made available very late in the process.
‘The FCA also found that analysts within non-syndicate banks and independent research providers generally lack access to the information they need to produce research on IPOs.
‘As a result, so-called “connected research” written by analysts within the book-running syndicate is the dominant source of information available to investors during a crucial stage of the process. This is of particular concern given the conflicts of interest that arise during the production of connected research, including analysts coming under pressure to produce favourable research on an offering if their bank is to secure a place on the book-running syndicate.’
‘A well-functioning IPO market with high standards of conduct is an essential part of the UK’s capital markets,’ says Christopher Woolard, Executive Director of Strategy and Competition at the FCA. ‘The IPO process has considerable strengths, but the proposals we have outlined in today’s Consultation Paper are designed to improve the range, and timeliness of higher quality information that is available to investors during the process.’
At the heart of equity
‘IPOs are the lifeblood of the capital markets and giving access to a wider range of investors, both institutional and retail, is crucial to the long-term health of the UK’s economy and its underlying companies. The public is vital in improving liquidity for companies, and we’ve long been in support of providing a simple and transparent route to these offers, giving retail investors the same access as institutional investors,’ says Gonçalo de Vasconcelos, CEO and Co-founder of SyndicateRoom.
‘The move by the FCA signals a commitment to improve capital raises for great British businesses, giving them a greater chance on their funding journey.’
At SyndicateRoom, we believe that equality should be at the heart of equity investment. Giving the retail community access to the same benefits that institutional investors enjoy signals a strong starting point to achieving just that.