Financial regulators have proposed a raft of changes to the initial public offering (IPO) process, aimed at improving investors’ access to corporate information and boosting competition among banks. The Financial Conduct Authority (FCA) has suggested companies should provide more details to investors earlier on and give them more time to digest the documents.
The industry watchdog questioned the adequacy of the two-week ‘blackout’ period prior to an IPO, when house brokers are barred from publishing research so that investors have time to peruse filing documents and reach their own conclusions. It has proposed delaying the publication of house research until a week after the prospectus is released. The agency also suggests companies should file a preliminary prospectus that excludes pricing information, allowing investors to access a key source of information earlier in the listing process. Currently, companies publish a prospectus when trading commences.
The FCA highlighted other areas for improvement. For example, it wants to discourage banks from offering loans and other services to win over companies seeking to float - giving them an edge over brokers without lending businesses - and offering shares in upcoming floats to preferred clients. It’s also keen to strip out clauses in contracts that prevent companies from switching banks, and to move away from unreliable league tables that rank banks on their dealmaking abilities. And it argues independent analysts should have greater access to a company’s management team ahead of listing.
Tom Hinton, head of capital markets at crowdfunding platform SyndicateRoom, said: “The public is vital in improving liquidity for companies so providing a simple, clear and transparent way to access these offers on the same terms as institutions is clearly beneficial.”
The downside of new IPO regulations could be further reductions in the number of companies pursuing London listings. Analysts at PwC estimate proceeds from UK floats halved in value to £1.8bn in the first quarter of the year, reflecting uncertainty ahead of the summer referendum on whether the UK should remain in the EU.
The FCA report comes at a disruptive time for the agency. Andrew Bailey, currently the boss of sister regulator the Prudential Regulation Authority, will take over from acting FCA chief Tracey McDermott in July. She took over in September after chancellor George Osborne declined to renew the contract of her predecessor, Martin Wheatley, following the Conservatives’ victory in the general election.
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