Last month we wrote on the state of the UK’s IPO market which, despite making a promising start to 2022, has since seen activity flounder. Granted there are significant geopolitical and macroeconomic headwinds which companies are having to face up to and these show few signs of abating quickly, but recent weeks have seen two potentially fundamental developments.
FCA’s response to listing reform
On May 26th, the FCA set out an ambitious vision for reform to the way companies list in the UK. The aim is to attract more high quality, growth companies to join the London market and in turn give investors globally greater opportunities. It’s difficult not to find cause for cheer when agendas for change like this are being laid out and adds to the options as set out by Lord Hill just over a year ago. Arguably the highest profile step being proposed is the elimination of the primary vs standard listing option when companies come to market, removing what some perceive as being a stigma if the superior categorisation can’t be achieved. This may look like a very modest form of progress but given the venerable nature of the London market and the FCA’s tendency to err on the side of caution, even this can be heralded as progress.
UK audit reform
Following a spate of high-profile corporate collapses, many of which have seen fingers of blame pointed at the audit industry – and resulted in significant damage to related company pensions – reform of how accounts are deemed as being accurate reflections of a business have been mooted for some time. This was most recently tabled in the Queen’s Speech at the start of May, but the details, released on May 31st, have been sufficient to provoke a degree of active debate.
On one side, the UK won’t be going down the Sarbanes-Oxley route in the US, so directors will not be held personally liable for future failures. Conversely, however, the service providers – i.e. the auditors – will be subject to greater accountability and there’s an expectation that greater levels of transparency will emerge as a result. Plenty will see this as having had the potential to deliver much more for the benefit of investors – and indeed other stakeholders – but the outcome tabled should at least not present any further barrier to entry when it comes to establishing a UK plc, potentially one which will then find itself listed on the public market.
Do these two points together favour issuers? Arguably that’s very much the case. However given the skittish state of public markets and those ongoing concerns over what valuations can actually be delivered, only time will tell if these two events can be sufficient to deliver a shot in the arm to the listings industry.
Again, drawing on last month’s column where we provided an overview of the equity IPO market, Avenir Registrars is also a significant provider of registry services when it comes to UK domestic corporate debt issuance. Perhaps unsurprisingly given the fact we’re now in a phase of rising underlying interest rates, the buy side demand for fixed interest propositions, especially on longer dated paper, is flagging. We are seeing the mention of UK floating rate notes after a very long time, having seen fleeting mentions of amortising structures at the start of the pandemic in 2020. With seemingly more nimble world supply chains, the reality appears to be different from that of the 1970’s and we observe debt fund raising continues to remain a strong accompaniment to equity fund raising. However, the same core methodologies we apply at Avenir Registrars to equity issuance, ensuring that processes are optimised to keep timelines short and costs low, also sit at the heart of our debt issuance model. If you have clients who are looking for a cost effective way of managing a debt issuance – either on a public or private basis – we’d be more than happy to talk. More details can also be found at www.avenir-registrars.co.uk/bonds/
This article originally appeared in the June 2022 version of AIM Journal. You can download a printable version here.