LSE to change listings rule
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Companies will no longer be compelled to reserve a proportion of their shares for private investors when first coming to the market, the Stock Exchange announced yesterday.
Following market consultation which showed virtually no support for the Initial Public Offering requirement, designed originally to promote wider share ownership, the exchange said it would be removed from its rule book from next year.
"As far as the listing rules are concerned, and with effect from 1 January 1996, companies will be able to issue securities by whatever method they choose, subject to certain limited criteria," the Stock Exchange said.
But Michael Lawrence, the exchange's chief executive, expressed concern that the responses to the consultation had been so one-sided. "I do not believe the outcome of the consultation is a fair reflection of the interest of the public at large on this issue," he said.
Citing the Stock Exchange's duty to promote wider share ownership, Mr Lawrence has set up a committee to look into ways of achieving this aim without the the IPO rule.
The committee will be chaired by Sir Mark Weinberg, executive chairman of St James Place Capital, an investment company. Sir Mark said: "Irrespective of the dropping away of the IPO requirement, there is a sense that something needs to be done to encourage wider share ownership. There is no simple answer; we shall be looking at a whole range of issues, including tax, the effect of nominee share ownership, PEPs - the whole mosaic."
The present IPO rule requires an offering of shares to be made to the general public when the offering exceeds a certain monetary threshold. But replies to the consultation said there was a high level of flowback of shares from private investors to institutions following the initital take-up. Most respondents said the rule merely inhibited or increased the cost of capital to companies, with offers under-priced to generate sufficient interest among private investors to satisfy the rules.
Mr Lawrence said the IPO requirement no longer had a place in the Stock Exchange's Yellow Book, which sets out its listing rules for a company coming to the market, because it did not serve the purpose of investor protection.
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