Hargreaves Lansdown, the UK private investor platform with over £155bn in client assets, has responded positively to regulatory changes affecting the listings regime in the UK intended to reverse a decline trend experienced since the global financial crisis triggered in 2008.
Since then, the number of listed companies in the UK has declined some 40%, with the UK accounting for just 5% of Initial Public Offerings (IPOs) globally in the 2015-20 period, according to the FCA citing the UK Listing Review.
The regulatory tack means companies already listed will in most cases not need to publish prospectuses to issue more shares, with the time between a prospectus being issued and an IPO being halved to help companies list more quickly on the stock exchange.
Additionally, Hargreaves Lansdown notes, companies will be able to issue corporate bonds to retail investors more easily while a new public offer platform targets smaller companies seeking to raise funds.
Susannah Streeter, head of money and markets, Hargreaves Lansdown, commented: “London has struggled to compete with super-star valuations on Wall Street and has been facing an exodus of listed firms leaving for pastures new. The City needs a leg-up and the Financial Conduct Authority is attempting to provide support by making it cheaper and easier for companies to raise funding in London. Companies have long bemoaned the difficulties of raising money in a tangle of red tape, which this shake up is designed to cut through.”
“These changes in prospectus rules should encourage more companies to raise money on the London market and make the UK more attractive place to list. In addition, it will result in more capital raisings being open to retail investors. At Hargreaves Lansdown we know there’s huge demand for participation from long term retail investors but all too often they’ve be cut out. These new rules present a sea change from the regulator, its now time for the funding pipeline to do their bit, opening up more offers to retail investors.”
According to Hargreaves Lansdown, the new rules should make it easier for companies access secondary capital raising via retail investors. The shift includes a change to the threshold requirement for when a prospectus is required to raise additional funds, going from the current 20% to 75% of existing share capital.
The FCA estimate quoted is that it could save UK companies up to £40m per year as they seek capital.
The disclosure standard adjustment will facilitate bonds being issued in smaller batches, Hargreaves Lansdown notes.
“The establishment of public offer platforms marks a big step of progress, ” Streeter adds. “Companies will be able to use the platform to offer big chunks of bonds or shares without needing to compile a costly and lengthy prospectus. Crucially, offers will also be available to retail investors via authorised firms. The public are used to the crowdfunding concept so this should help spark the imagination and revitalise interest in investing.”
“By fostering a retail investment culture and making UK markets a more attractive place for listings, it will help build a more dynamic and equitable financial ecosystem. It’s still not going to be easy to compete against the might of New York, but with continued collaboration across the industry, these changes should provide more fuel to power an engine of growth and innovation.”
FCA announcement
The FCA announced on 11 July an overhaul of its listing rules in its publication PS24/6: Primary Markets Effectiveness Review: Feedback to CP23/31 and final UK Listing Rules, which will come into effect on 29 July.
The regulator noted that “the current Listing Rules (LR) sourcebook will cease to have effect and will be replaced by the new UK Listing Rules (UKLR) sourcebook.”
“Market participants impacted by these changes should read this Policy Statement (PS) and the final rules instruments. These rules will also appear in the FCA Handbook in due course,” adding “the new UKLR sourcebook is the determinative instrument and should be read in its entirety along with this PS to understand the full detail of our final rules.”
Positioned as “the biggest changes to the listing regime in over 3 decades,” Sarah Pritchard, executive director, Markets and International, at the FCA commented: “A thriving capital market is vital in delivering investment to growing companies plus returns and choice to investors. That’s why we are acting to make it more straightforward for those seeking to list in the UK, while retaining vital protections so investors can help steer the businesses they co-own.”
“Regulation is only part of the answer in helping the UK achieve sustainable growth. Other factors also play a significant role in influencing where a company decides to list. We’re committed to continually working together with all those who have a part to play in supporting a thriving UK capital market and thank everyone who has contributed to this work so far.”
