Despite the economic downturn in the UK and elsewhere since the onset of the coronavirus pandemic, there’s still much to be excited about in 2021.

Not least the news that in order to boost London’s attractiveness to investors post-Brexit, stock exchange rules concerning blank cheque companies or SPACs will be reformed as part of a wider ranging and more general reform.

As and when businesses are listed, there is now the ability for company founders to keep greater control.

The purpose of removing some investor protection is to ensure that London’s standing, in what has been seen as a dormant SPAC (Special Purpose Acquisition Company) market for years, gets a vital boost.

Even chancellor, Rishi Sunak, noted that “we’re determined to enhance this reputation now we’ve left the EU.”

In general terms, there is a requirement in London for investors to be protected from any price hikes once a deal is completed. That’s achieved by the cash shells suspending shares once a business to be acquired has been found.

One recommendation, that WGP Global doesn’t necessarily agree with, is a dual-class share ownership model for London SPACs. The purpose, so it seems, is to allow greater voting power for the founders, expiring after five years.

Corporate governance standards still need to be met of course, so there’s likely to be other curbs somewhere down the road.

For a London premium listing, at present, companies have to sell at least 25% equity. This would be reduced, quite drastically in our opinion, to 15%.

Though there are FTSE benefits and potentially bigger trading volumes, WGP Global’s contention is that this could open up a huge can of worms, despite the seemingly ‘good news.’

Various other proposals are due to be looked at, with the listing rules potentially changing later in 2021.

They include a duty for the FCA to look at “the U.K.’s overall attractiveness as a place to do business,” as well as rethinking documentation used before the prospectus is issued.

Whilst it’s true that London has seen a large number of new listings in 2021, including Moonpig Group Plc, they’re way behind Wall Street. Compared the $83 billion raised last year to London’s measly 3.3 billion pounds ($4.6 billion).

LSE needs to up its game, something that their Chief Executive Officer, David Schwimmer, acknowledged. “Continuing to evolve the U.K. listings regime is key to providing flexibility for companies who want to list in London.”

Investor groups, not surprisingly, have raised a number of concerns about some of the proposals. Proposals that have come hot on the heels of former Worldpay boss, Ron Kalifa’s review into the fintech industry, which included evidence from the likes of Revolut and HSBC Holdings Plc to name just two.
It’s clear that London has to get back to being the premier global financial hub, and Brexit or not, the opportunity being presented to it has to be taken.

Leave a Reply

Your email address will not be published. Required fields are marked *