Cash-poor UK firms lobby for looser rules on stock offerings
Advisers to cash-strapped British firms are lobbying regulators to loosen rules governing new stock offerings, in the hope it could make it easier for struggling companies to raise funds.
An industry body representing investment banks is asking the Financial Conduct Authority (FCA) to increase the maximum allowed discount for equity sales on the London Stock Exchange while the coronavirus pandemic continues.
The Association of Financial Markets in Europe (AFME) is also lobbying for London-listed firms to be able to sell a greater amount of stock without gaining shareholder approval than currently recommended under corporate governance rules.
The proposed regulatory changes could help companies quickly raise fresh capital as coronavirus batters the global economy and threatens a global recession.
The FCA’s current rules allow companies to sell new stock at an up to 10 per cent discount to the market price when an offering is announced, unless shareholders have approved a greater discount for that specific transaction.
Sign up to City PM’s Midday Update newsletter, delivered to your inbox every lunchtime
Companies trading in London also often seek upfront approval to sell stock to outside investors without it first being offered to existing shareholders.
Investment industry bodies typically suggest such offerings should be limited to five per cent of a company’s share capital, or 10 per cent if the raise is to fund a specific investment.
Although UK regulators allow for larger raises than that, companies have in the past been censured by industry groups for doing so.
News of the lobbying efforts was first reported by Bloomberg. The AFME and FCA both declined to comment.