The IPO market is picking up again after the post-Brexit vote hiatus. Some high-profile names are reportedly preparing to list in London in the coming months including warehouse company Logicor and mobile network O2.

At the same time the Financial Conduct Authority (FCA) is making progress with its shake-up of the rules governing companies heading for a flotation.

At present the full prospectus, containing chapter and verse on a company and the various risks it faces, is often not made publicly available until after a stock is already trading.

The FCA’s latest plans, announced 1 March, aim to make the process more transparent.

The US has been cited as a model. Across the pond a registration document must be filed publicly before even the US market regulator, the Securities and Exchange Commission, sees it.

Shares has been vocal about the need for reform in this area, although it remains to be seen if retail investors will see any genuine benefit.

Tell me about the proposed changes

In broad strokes the FCA is looking to bring the publication of a company’s prospectus forward and open up a process which currently only allows for ‘connected research’ from the banks which are running the IPO to be published ahead of time.

Two alternatives are proposed to address this problem. The first would see a company meet all independent analysts in one go, leaving them free to put out their research once an intention to float announcement is published.

The alternative would see ‘connected’ analysts meet the company first, briefing independent analysts within seven days, after which both would issue their reports.

The chief executive of research consultancy Lazarus David Knox comments: ‘Bringing the publication of the prospectus earlier in the process has to be a good thing. This gives the institutional investment community the opportunity to see facts and figures.

‘Secondly allowing independent research analysts syndicated access to write unconflicted and independent research should lead to greater transparency and a better price discovery process.’

What's in it for private investors?

Knox, formerly head of research at JPMorgan Cazenove, reckons the retail investment community could also benefit as independent analysts make research available to private client brokers and more information filters through to the retail investor base.

The key risk of the changes, according to Knox, is ‘if not handled properly’ that the process becomes too onerous for mid-sized and smaller companies and inhibits new stock market floats.

The FCA’s consultation process runs until May and it will consider responses before drawing up the final rules which are unlikely to be published before 2018. (TS)

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