“It makes no sense to have a theoretically perfect listing regime if in practice users increasingly choose other venues,” says Lord Hill in the introduction to his report on how to shake up London’s stock market listings regime.
It’s a fair, pragmatic point. London accounted for only 5% of IPOs, or flotations, globally between 2015 and 2020, which is a feeble performance if the post-Brexit ambition for the stock market is to rival New York, and not just deflect Amsterdam’s challenge. A few of London’s supposedly sacred governance principles were always likely to be sacrificed.
At least Hill has tried to soften the process. The least objectionable proposal is the green light for dual classes of shares. Such “golden share” structures are a governance no-no but the US, by accepting them, has dealt itself an ace card to lay in front of footloose founders of technology firms. Hill proposes a five-year limit on “golden share” structure. That is better, governance-wise, than open-ended US arrangements.
Nor should a reduction in “free floats” – the minimum proportion of shares available to outsiders – from 25% to 15% cause too much fuss. Actual liquidity, rather than percentages, is more important.
Hill’s embrace of Spacs, or “blank cheque” special purpose acquisition companies that are all the rage in the US, will rightly be more controversial. He could have taken a harder line against elaborate structures that seem designed to bypass traditional levels of scrutiny by investors. Hill recommended a Spac regime that would be stricter than Amsterdam’s. That’s not saying much.
The real disappointment, though, was the lack of a big proposal to boost the role of private retail investors in stock markets – the cause championed here yesterday. There were warm words about the importance of individual investors, and a few ideas to make IPO prospectuses more user-friendly, but the Treasury has effectively been handed the job of conducting another review to remove obstacles in front of retail participation. Maybe it will happen; maybe it won’t.
The rest of review, though, should be broadly acceptable. London needs to be in the game of attracting young and growing companies. For governance purists, it could have been worse.
It’s end-of-an-era time in Wotton-under-Edge in Gloucestershire, global base of Renishaw, one of the UK’s most quietly successful engineering companies.
Sir David McMurtry and John Deer founded the maker of ultra-precise measuring devices and equipment in 1973 and now, having reached their 80s, they want to sell their stakes. Between them, they own 52% of Renishaw, a holding worth roughly £2.5bn, so the whole firm is on the block.
As you would expect (or hope), McMurtry and Deer do not wish their life’s work to end up with a carve-up merchant. They are seeking innovation-led buyers that will “respect the unique heritage and culture of the business, its commitment to the local communities in which its operations are based”.
One hopes the duo find what they are looking for, but the task does not look easy, however. At £5bn – in other words, within touching distance of the FTSE 100 index – Renishaw is not a small mouthful. It is hard to think of a British engineering company that is both big enough and would fit the bill. Rolls-Royce is valued at £9bn but is fighting fires on many fronts; in any case, while it is customer of Renishaw, this isn’t its market.
A large overseas engineering combine therefore seems the most likely buyer. That could still be honourable way to go, of course; it would depend on the buyer’s commitments to the business. But it would also feel a slightly underwhelming finale.
Is there anything left to reveal in the budget? We’ll find out soon enough but the Treasury’s late news on Tuesday that the furlough scheme is being extended until September would normally have qualified as a “rabbit out of the hat” announcement. An extension of only two or three months from the current April cut-off had been expected.
A longer timetable is sensible and will be welcomed, especially by small employers in sectors such as hospitality and events. But why couldn’t it have been made a month ago or six weeks ago, which was the point of greater uncertainty for firms? The obsession with budget day (and the run-up to budget day) is not healthy.