UK opens door to SPACs, big tech IPOs to compete with New York
3 min read . Updated: 03 Mar 2021, 05:06 PM ISTGovernment proposals aim to help London retain its place as Europe’s pre-eminent financial center post-Brexit
The U.K. government signaled support for looser stock-listing rules to attract tech companies and SPACs, moves aimed at helping London compete with New York and retain its position as Europe’s pre-eminent financial center post-Brexit.
The proposals, expected to be formally announced Wednesday, would make it easier for company founders to list shares without giving up control and still make the stock eligible for inclusion in the London Stock Exchange’s blue-chip FTSE indexes.
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Changes would also place London on more equal footing with New York to compete for the surge in special-purpose acquisition companies, or SPACs, a popular vehicle that short-circuits the traditional initial-public-offering process.
The proposals “are about closing a gap" between London and other global centers, said former U.K. politician Jonathan Hill, who spearheaded a government-ordered review of the listing rules.
London faces challenges to its status following the U.K.’s official departure from the European Union. Big chunks of London stock-trading volumes quickly moved to venues in Amsterdam and Paris when post-Brexit rules took effect Jan 1.
U.K. Treasury chief Rishi Sunak said he would move quickly on the recommendations. The U.K. government is betting on a thriving IPO market to create jobs for bankers, money managers and other professionals in support of the country’s financial-services sector.
The listing rule changes, which require approval from the U.K.’s Financial Conduct Authority, would also aim to diversify London’s recently underperforming stock market, which is tilted toward old-line companies in areas such as banking, energy and mining.
To attract more tech names to London, Mr. Hill’s report recommends dropping the maximum number of shares that companies need to sell in an IPO for a “premium listing" needed for index inclusion to 15% from 25%. Similarly, founders should be allowed to sell dual-class shares in an IPO to retain greater voting rights than public investors.
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Dual-class share structures have helped Nasdaq and the New York Stock Exchange attract such hot tech IPOs as Facebook Inc., Google parent Alphabet Inc. and Snap Inc. Today Facebook and Alphabet are among the largest members of the S&P 500 benchmark and serve as magnets for new growth companies to list in the U.S.
Last month, South Korea’s Coupang Inc. announced plans for a U.S. IPO in a deal that is expected to generate a valuation exceeding $50 billion.
Hong Kong introduced dual-class shares in 2018, sparking a series of high-profile tech listings, including China’s Alibaba Group Holding Ltd. the next year.
Clare Reilly, an executive from pension provider PensionBee Ltd., warned that the move could erode investor protections.
“One share, one vote is the foundation of strong corporate governance, and we see that as a principle that’s under threat all around the world," she said.
Regarding SPACs, the proposed changes could let investors opt out of deals if they don’t like the acquisition the SPAC managers choose and would let them trade shares immediately after a deal’s announcement, bringing London in line with the U.S. market.
London’s tighter listing requirements have left it behind when it comes to SPACs. Some European companies, including U.K. betting data firm Genius Sports Group Ltd., and Arrival Ltd., a London-based electric-vehicle manufacturer, both announced plans in recent months to list through New York-listed SPACs.
SPACs appeal to tech startups over traditional IPOs because the process is faster and allows companies to provide revenue and profit forecasts to attract investor interest.
This story has been published from a wire agency feed without modifications to the text.
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