U.K. Plans to Ease Capital Raising in Post-Brexit Overhaul

(Bloomberg) --

The U.K. government is looking to ease the rules for companies to raise cash as part of a wide-ranging revamp to boost London’s standing as a global financial center after Brexit.

The review focuses on shortening the time frames for lengthy stock offerings like rights issues, where companies offer new shares to existing holders first, according to a statement Tuesday. 

Other changes being considered include facilitating retail investor participation in fundraisings, examining the use of new technologies and making the capital raising process more efficient for London-listed companies.

Pandemic-induced lockdowns last year pushed U.K. companies to raise cash in droves. London saw a banner 21.8 billion pounds ($30 billion) of new stock offerings in 2020, alongside 13.86 billion of rights issues, data compiled by Bloomberg show.

Accelerated block trades allow companies to raise fresh funding quickly, but they don’t give precedence to existing investors and are unsuitable for raising large amounts of capital. Rights offerings, meanwhile, can be bigger in size, but take much longer to prepare and wrap up.

Post-Brexit London

The review will also look at markets such as Australia, where follow-on fundraising is quicker and more easily accessible by retail investors.

A more streamlined approach to rights issues, like the one adopted by Australia, would likely help to reduce costs and increase execution efficiency for U.K. issuers, said George Marshall, a corporate finance partner at Baker & McKenzie LLP. 

“A much more lean disclosure document based on this model may also help boost the attractiveness of the U.K. as a listing venue for high-growth companies seeking substantial follow-on offerings to fund the next stage of their development,” he said.

The new capital raising review follows a broad-ranging set of recommendations made by Jonathan Hill, a former financial services commissioner for the European Union. His suggestions have set off an overhaul of the U.K. listing rules, including easing the path for special-purpose acquisition companies to raise money in London. 

This reform has already paid off, with IPO proceeds so far in 2021 tallying 14.1 billion pounds, the most for this time of the year since 2014, the data show.

“Over the coming months we look forward to working with the government, regulators and the wider ecosystem to ensure that the U.K.’s capital markets evolve to meet the changing needs of companies and investors and remain one of the most compelling places globally for them to achieve their ambitions,” London Stock Exchange Plc’s Chief Executive Officer Julia Hoggett said in an emailed statement. 

Chancellor of the Exchequer Rishi Sunak on Tuesday appointed Mark Austin, a partner at law firm Freshfields Bruckhaus Deringer, as the independent chair of the review. Bloomberg News reported in March 2020 that British regulators were in talks with advisers about potential changes to the capital raising rules.

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