On 5 July 2021, the FCA launched a consultation process on a series of proposed changes to the regulations surrounding the UK primary markets, including:
- introducing dual class share structures, allowing founder shareholders to retain additional control of the company post-float;
- reducing the free float requirement (from 25 per cent. to 10 per cent. of shares which must be held in ‘public hands’); and
- updating the Listing Rules (among others) to reflect technological innovations and market practice (building on the investor protection measures also being considered in relation to SPACs from a previous FCA consultation in April / May 2021).
The FCA consultation period is set to run until 14 September 2021, with a planned implementation of the new regime before the end of 2021.
Whilst the FCA’s renewed focus on attracting top tier investment and enhancing investor protection are welcome, the proposed reforms are not unexpected. Post-Brexit and post-coronavirus economic recovery are rightly high on the Government’s agenda, and the long term effectiveness of the UK listing regime needs to be prioritised in order to secure the UK’s future as a key FinTech player, to maintain its reputation for high quality investment and innovation, and to lead by example in implementing a market-leading ESG strategy.
In our February 2021 article, we predicted that founder-led companies wishing to list in London will seek to deter future unwanted takeover attempts by various mechanisms (as seen with the “poison pill” adopted in The Hut Group’s IPO) including drawing inspiration from US-style techniques employed by Silicon Valley founder-led technology businesses, and that crucially UK institutional investors will increasingly be prepared to advocate such defence strategies. The proposed reforms by the FCA solidify our view that US-style “poison pills” are here to stay in the UK market.
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