The UK has kicked off its review of listing and capital raising rules, with veteran Freshfields partner Mark Austin at the helm.
The Treasury said the new review would act to boost companies listed on UK stock markets by giving them more options when raising capital.
The review will examine whether rule changes and better use of technology could make capital raising more efficient for companies already listed on UK markets.
“We want to make sure companies who already tap our world-leading capital markets can raise finance efficiently and include their current shareholders in the process,” said chancellor Rishi Sunak.
The launch of the review is the latest step in the government’s response to Lord Hill’s UK Listings Review, which was set up to make the UK an even more attractive destination for IPOs and optimise the capital raising process for large and small companies.
The UK’s capital markets were a lifeline for many companies through the pandemic, with £30bn ($40.8bn) of new equity raised in 2020 to shore up businesses, protect jobs and seize opportunities to grow.
However, most of these businesses chose to raise funds through private placings with a small group of institutions, which can be completed faster and at a lower cost, but exclude existing shareholders and dilute their stakes in the company.
The UK Listings Review found companies are deterred from using other mechanisms like rights issues, which preserve the interests of existing investors in the company, because they involve greater costs, time and uncertainty, and require the publication of a prospectus.
“Improving the efficiency of secondary capital raisings by listed companies is an important element of making the UK an even more attractive place for businesses to list," said Austin, noting that the review has launched a call for evidence from interested parties.
The call for evidence runs until 9 November, with the findings released in spring 2022.
The expert group led by Austin will review these regulatory barriers and open up the choices for listed companies seeking to raise capital, including by looking at the overall duration of the process, considering whether new technology can be used to speed up the information flow to shareholders and help them exercise their rights, and assessing other fundraising mechanisms that are used in international markets.
The work will be carried out in consultation with relevant stakeholders including the government and the Financial Conduct Authority, buy-side and sell-side firms, listed companies, and legal and academic experts.
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