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12 October 2021

FT: Ministers plan to overhaul capital raising rules to boost London market

Review will seek to include more retail investors in secondary placings

Ministers are planning to make it easier for UK-listed companies to raise capital as part of a wide-ranging strategy to boost London’s stock market after Brexit. Officials want to give companies more options to tap into deeper pools of money when raising funds through so-called secondary transactions such as selling new shares in a rights issue. They are also seeking to help companies access a more diverse range of investors.

Secondary fundraisings are often used when companies want money for emergencies or to finance investment in growth strategies that require cash quickly. Chancellor Rishi Sunak said plans to boost UK markets go beyond attracting companies to list. “We want to make sure companies who already tap our world-leading capital markets can raise finance efficiently and include their current shareholders in the process.”

Most companies that took more than £30bn last year in secondary raisings did so through private placings, using only a small number of institutional investors. This route is typically faster and costs less but excludes existing shareholders and dilutes other investors’ stakes in the company. In contrast, only nine rights issues occurred. Like open offers of new shares to all existing shareholders, these tend to involve greater cost, time and uncertainty and involve the publication of a prospectus.

Between January and August this year, £9.5bn was raised in 393 secondary transactions. Chart showing secondary transactions topped £30bn in London last year but most were private placings The new review will consider whether to relax the rules around rights issues — which preserve the interests of existing investors in the company — to make them more attractive. Officials also want to open up fundraisings to retail investors, who in the past have been locked out of these institutional processes....

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