Plans to make UK IPOs more transparent 'could mean greater role for financial comms'

Senior financial comms experts have broadly welcomed new proposals to force more transparency around UK stock market flotations, although they stress that implementation should be handled with care.

Financial comms may play a greater role in IPOs, going forward (©pexels, via Pixabay)
Financial comms may play a greater role in IPOs, going forward (©pexels, via Pixabay)

The Financial Conduct Authority (FCA) has launched a consultation on reforming procedures around IPOs in the UK, bringing them more in line with the US.

The FCA said it wants to improve the range and quality of information available to investors during the IPO process.

The organisation said that currently, IPO prospectuses are made available to potential investors "very late in the process".

The concern is that by this point, the so-called "connected research" - published earlier by the banks appointed to co-ordinate the process - has become "the dominant source of information available to investors during a crucial stage of the process".

"This is of particular concern given the conflicts of interest that arise during the production of connected research, including analysts coming under pressure to produce favourable research on an offering if their bank is to secure a place on the book-running syndicate," the FCA said.

The consultation calls for prospectus or registration documents to be available to would-be investors before the connected research.

Alex Simmons, head of capital markets at Smithfield, the financial division acquired by Edelman in 2015, said: "Whilst a move towards greater transparency should be welcomed, from a communications advisory perspective, the consequences of opening up the IPO marketing process to unconnected analysts, and multiplying the sources of information and voices commenting prior to flotation, will need careful orchestration.

"Whatever the outcome of the consultation, fundamentally, in an environment where the volume of available information and number of market commentators in an IPO increases, it will be more important than ever for companies to have a clearly articulated and powerful investment case."

Ben Burton, MD, corporate, financial & public affairs at Weber Shandwick, said: "It is probably true to say that transparency, in particular timing of disclosure, ahead of IPOs in the UK has lagged other major markets, which has resulted in a narrowing of IPO communications activity over the years.

"Greater exposure will theoretically bring greater interrogation, by both media and analysts, though whether the latter will be a reality, given current pressures on research business models, is debatable."

Another senior financial comms practitioner, who declined to be named, stressed the need for changes in transparency around IPOs in the UK.

"The restrictions on access to independent research during an IPO are akin to a shopkeeper encouraging you to come in to their store then applying a part-blindfold. The FCA's consultation paper is timely given the global competition on where IPOs take place, and if the proposals are adopted would bring the UK in line with the US.

"Detailed independent information about issuers in IPO processes should be made available sooner and to a wider range of investors and all analysts should have access to an issuers' management team, rather than just those connected with the deal. A review is much needed into a process where timing, sequencing and quality of information given to investors creates an uneven playing field and brings in additional conflicts of interest."

The expert added that an "added benefit" could be "a new market for unconnected research on an IPO".

The FCA consultation closes on 1 June.


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