Equity Capital Markets Update

Transcription

1 Equity Capital Markets Update Colin Bole Chris Horton Simon Ovenden Chris Walton Alex Ainley FI & AMIF Autumn Legal Update 2017

2 Overview FCA consultations: - IPOs and unconnected research - review of UK primary markets - new listing category for sovereign controlled companies - guidance on sponsor obligations Equity private placements Ban on use of restrictive contractual clauses MAR update: - ESMA Q&As - Subscription for shares Prospectus Regulation 1 / L_LIVE_EMEA1: v2

3 FCA consultations: IPOs and unconnected research FCA proposals for improvements to the timing, sequencing and quality of information provided to market participants in the UK IPO process (CP17/5) Concerns: market integrity and consumer protection are compromised because investor information and price discovery are based primarily on connected research, which is potentially biased or perceived as biased, rather than on an approved prospectus current IPO process restricts competition among analysts because of the barriers that unconnected analysts outside the syndicate banks face in producing IPO research disclosure of information during IPOs that is potentially inconsistent with Market Abuse Regulation (MAR) 2 / L_LIVE_EMEA1: v2

4 FCA consultations: IPOs and unconnected research Two key reforms proposed: earlier prospectus and access to management for unconnected analysts stricter guidance on interactions by unconnected analyst An approved prospectus or registration document to be published and unconnected analysts to have access to management before publication of connected research if unconnected analysts given access to management at same time as connected ones publication of connected research day later if given access later publication of connected research at earliest seven days later access must be on reasonable terms 3 / L_LIVE_EMEA1: v2

5 FCA consultations: IPOs and unconnected research Management access for unconnected analysts alongside connected analysts in private phase and a minimum one day separation between registration document and connected research Final four weeks of private phase Public phase (four weeks) Max 14 days 14 days Analyst presentation to connected and unconnected analysts (four weeks before ITF announcement) Publication of registration document no offering information (at least one day before ITF announcement) ITF announcement Earliest publication of connected / unconnected research Investor education and initial price discovery Publication of securities note (with price range) and summary Management roadshow and book-building Start of trading Management access for unconnected analysts post-registration document and seven-day separation between registration document and connected research Final four weeks of private phase Public phase (four weeks) Max 14 days 14 days Analyst presentation to connected and unconnected analysts (four weeks before ITF announcement) Publication of registration document no offering information (at least one day before ITF announcement) ITF announcement Earliest publication of connected / unconnected research Investor education and initial price discovery Publication of securities note (with price range) and summary Management roadshow and book-building Start of trading Analyst presentation to unconnected analysts (must be before connected research is published) (Source: FCA CP 17/5). 4 / L_LIVE_EMEA1: v2

6 FCA consultations: IPOs and unconnected research Any interaction between a bank s analysts and issuers or their corporate finance advisers would be treated as the analysts participating in pitching for the IPO work from the issuer (and therefore inconsistent with maintaining the analyst s objectivity) until the bank has accepted an IPO mandate and its position in the syndicate has been agreed FCA policy statement outlining changes expected in / L_LIVE_EMEA1: v2

7 FCA consultations: review of UK primary markets Discussion paper to prompt a broad discussion about the effectiveness of the UK primary markets landscape (DP17/2) views on: standard listing vs new international segment exchange traded funds science and technology companies (scale-up and patient capital) Consultation paper on proposed enhancements to the Listing Regime (CP17/4) technical enhancements; not fundamental changes Chapter 6 new concession for property companies class tests reverse takeovers FCA response expected second half of / L_LIVE_EMEA1: v2

8 FCA consultations: premium listing category for sovereign controlled companies New category for issuer where a state exercises or controls 30% or more of votes Two key modifications to current premium listing regime: sovereign controlling shareholder would not be a related party controlling shareholder provisions would not apply to sovereign controlling shareholder Depositary receipts Free float Consultation closes 13 October 2017 Response expected toward the end of / L_LIVE_EMEA1: v2

9 FCA consultations: guidance on sponsor obligations Three new UKLA technical notes proposed Set out work FCA expects sponsors to carry out to ensure: directors understand their responsibilities and obligations under the listing rules and disclosure requirements and transparency rules ( rules ) directors have established procedures which enable an applicant to comply with the rules on an ongoing basis on publication of a circular, transaction will not have an adverse impact on listed company s ability to comply with the rules 8 / L_LIVE_EMEA1: v2

10 FCA consultations: guidance on sponsor obligations - common themes Guidance is not exhaustive must exercise professional judgement when complying with the applicable rule Undertake a systematic approach when considering sponsor declarations Sponsors obligations to be considered alongside Premium Listing Principle 1 or Listing Principle 1 Use experience of advising on other sponsor services and interactions with the FCA to enhance work undertaken by an applicant (or listed company) Review and challenge do not solely rely on the work / comfort provided by an applicant, reporting accountant or other professional adviser Importance of record-keeping at all stages of an engagement Useful examples given update sponsor manuals 9 / L_LIVE_EMEA1: v2

11 Equity private placements Back in vogue c.f. PIPEs Well established US market c.f. developing UK/European market Typical structure/process Sell-side/corporate issuer considerations contractual structure and protections Prospectus Directive/Financial Promotion regime Buy-side considerations unlisted securities with limited secondary market pricing LSE private placement platform 10 / L_LIVE_EMEA1: v2

12 Ban on use of restrictive contractual clauses From 03 January 2018, investment firms cannot include clauses in their written agreements that give them a right to provide future primary market and M&A services to the client Clauses that are banned are: right to act right of first refusal Clauses that are allowed are: right to match provided client remains free to choose pitching for future business considered in good faith with other providers Bridging loans 11 / L_LIVE_EMEA1: v2

13 MAR update: ESMA Q&As Latest update 29 September 2017 Closely associated persons (CAP) CAP includes a legal person, trust or partnership whose managerial responsibilities are discharged by a PDMR means PDMR takes part in or influences the decisions of that CAP to carry out transactions in financial instruments of issuer mere cross board membership not enough needs to be directly or indirectly controlled by, set up for the benefit of, or its economic interests are substantially equivalent Scope of financial instruments in market sounding regime financial instrument already admitted to trading in scope e.g. secondary offering such as rights issue financial instrument not admitted to trading only in scope if price or value depends on or has an effect on price or value of another financial instrument in scope of MAR for DMP to assess could apply to equity IPO where issuer already has debt listed or parent company is listed 12 / L_LIVE_EMEA1: v2

14 MAR update: ESMA Q&As continued Insider lists advisers and consultants subject to (and personally responsible for) drawing up and maintaining insider lists and providing to relevant competent authority Delayed disclosure disclosure of inside information is delayed but then loses element of price sensitivity: ceases to be inside information and no need to disclose publicly or inform competent authority about delay as it was inside information, need to have created and maintained insider lists and complied with other MAR obligations about delay of disclosure 13 / L_LIVE_EMEA1: v2

15 MAR update: subscription for shares New CLLS FAQ confirms: negotiating transaction which involves subscription for shares (e.g. issue of consideration shares on acquisition, undertaking to subscribe for shares in a firm placing) issuer can selectively disclose inside information to counterparties issuer can delay disclosure provided three conditions are met not expect inside information to be disclosed to the market before agreement entered into (CLLS and LSCL Committees Joint Working Parties MAR Q&A) 14 / L_LIVE_EMEA1: v2

16 Prospectus Regulation Repeals and replaces Prospectus Directive Came into force on 20 July 2017 and applies to prospectuses published on or after 21 July 2019 Some provisions in force from 20 July 2017, including: no prospectus required for the admission to trading of shares representing less than 20% (up from 10%) of the same class of shares already listed no prospectus required on admission of shares resulting from the conversion or exchange of other securities, providing that those shares represent less than 20% of the shares of the same class already admitted to trading (over a 12 months period) Prospectus Rules amended to reflect this No change to pre-emption thresholds in Pre-emption Group Guidelines Impact on M&A transactions and placings? 15 / L_LIVE_EMEA1: v2

17 Q&A

18 Key contacts Colin Bole Partner T E colin.bole@simmons-simmons.com Alex Ainley Managing Associate T E alex.ainley@simmons-simmons.com Chris Horton Partner T E chris.horton@simmons-simmons.com Simons Ovenden Partner T E simon.ovenden@simmons-simmons.com Chris Walton Partner T E chris.walton@simmons-simmons.com 17 / L_LIVE_EMEA1: v2

19 Equity Capital Markets Update FI & AMIF Autumn Legal Update 2017 simmons-simmons.com elexica.com This document is for general guidance only. It does not contain definitive advice. SIMMONS & SIMMONS and S&S are registered trade marks of Simmons & Simmons LLP. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated practices. Accordingly, references to Simmons & Simmons mean Simmons & Simmons LLP and the other partnerships and other entities or practices authorised to use the name Simmons & Simmons or one or more of those practices as the context requires. The word partner refers to a member of Simmons & Simmons LLP or an employee or consultant with equivalent standing and qualifications or to an individual with equivalent status in one of Simmons & Simmons LLP s affiliated practices. For further information on the international entities and practices, refer to simmonssimmons.com/legalresp. Simmons & Simmons LLP is a limited liability partnership registered in England & Wales with number OC and with its registered office at CityPoint, One Ropemaker Street, London EC2Y 9SS. It is authorised and regulated by the Solicitors Regulation Authority. A list of members and other partners together with their professional qualifications is available for inspection at the above address.