The City’s shake-up: what the punters say
● Big Bang 2.0?
London is still “a popular listing destination” for companies – as the recent successful floats of bootmaker Dr. Martens and online greetings card company Moonpig have shown, said Katherine Griffiths in The Times. But fears that the City has been “missing out” – particularly when it comes to tapping “fast-growth companies” – have been mounting. And the threat posed by Brexit hasn’t helped. The UK has already lost “billions of pounds of daily trading in European shares to Amsterdam”, and City figures fear forex and derivatives will follow. Hence, the proposed reforms to the listing regime laid out this week in a new review by Lord Hill of Oareford. But will they really prove the hoped-for “Big Bang 2.0”?
● Founders’ feast
The main moves, apparently inspired by the US system, are intended to be more entrepreneur-friendly, noted Bloomberg. The report includes a proposal for “dualclass” shares – as seen at US tech giants such as Facebook – enabling founders to retain “greater voting power” over their companies for five years after listing. It also proposes slashing the amount of equity a company must sell to outsiders (the so-called “free-float requirement”) from 25% to 15%. Finally, the review recommends scrapping rules preventing the take-up of special purpose acquisition companies (Spacs) in London – a belated move given the bonanza these “blank cheque” firms have been enjoying on Wall Street.
● Putting the boot in
Not everyone’s happy. The Investment Association warns “minority investors could lose influence at the expense of founders”. But something had to give, said Nils Pratley in The Guardian. “London accounted for only 5%” of flotations globally between 2015 and 2020 – “a feeble performance”. As Lord Hill observed: “it makes no sense to have a theoretically perfect listing regime if in practice users increasingly choose other venues”. There will be worries about the dangers of unleashing Spacs, given they “raise money from investors first and only then look for something to buy”. But the real disappointment was “the lack of a big proposal to boost the role of private retail investors”. Dr. Martens fans missed out at its launch, because the float was pitched solely to City institutions. It’s a shame that wasn’t addressed.