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IPOs: market activity from January 2010 to March 2011
Practical Law UK Legal Update 1-504-9265 (Approx. 6 pages)
IPOs: market activity from January 2010 to March 2011
by PLC Corporate
| Published on 14 Mar 2011 • United Kingdom |
A round up of the Main Market IPOs added to PLC What's Market since the end of 2009.
Speedread
As has been widely reported, IPO activity on the Main Market of the London Stock Exchange rose significantly in 2010 following very little IPO fundraising in 2009. 20 Main Market IPOs with a market capitalisation on admission of £150 million or above were included in the PLC What's Market database in 2010 compared to only two such IPOs in 2009. So far in 2011 (as at 14 March), Justice Holdings Limited and HMS Hydraulic Machines & Systems Group plc have completed IPOs within this scope but Nord Gold N.V. (which had an anticipated market capitalisation within this scope) decided to postpone the proposed offering it announced in January 2011. A number of other companies have announced an intention to float.
Of the IPOs of UK incorporated companies within the What's Market database, only Horizon Acquisition Company plc sought a standard rather than premium listing of its shares under Chapter 14 of the Listing Rules. Horizon, as a newly incorporated company formed to acquire a company or business, did not satisfy the eligibility criteria for a premium (or, at that time, primary) listing but stated that it intended to transfer to such a listing after it had made the acquisition and subject to eligibility. None of the UK incorporated companies that transferred to the Main Market from AIM sought a standard listing.
Most of the IPOs were underwritten and the underwriting commissions payable by issuers, taking in account any additional amounts payable on a discretionary basis, ranged from 2.75% to 4.05% of the proceeds of the issue of new shares.
As has been widely reported, IPO activity on the Main Market of the London Stock Exchange rose significantly in 2010 following very little IPO fundraising, but high numbers of secondary issues, in 2009.
20 Main Market IPOs with a market capitalisation on admission of £150 million or above were included in the PLC What's Market database in 2010 compared to only two such IPOs in 2009 (both were announced in December of 2009). So far in 2011 (as at 14 March), Justice Holdings Limited and HMS Hydraulic Machines & Systems Group plc have completed IPOs within this scope but Nord Gold N.V. (which had an anticipated market capitalisation within this scope) decided to postpone its proposed offering and listing stating that, although the offering was met with strong investor interest, it believed that in the market conditions it was not in the best interests of the company or its shareholders to proceed on terms which would have significantly undervalued its business. A number of other companies have announced an intention to float.
Standard and premium listings
The listing regime underwent a number of changes during 2009 and 2010. In particular, in October 2009 the standard (then called "secondary") listing route became an option for UK companies, having previously only been available to overseas companies (until 6 April 2010, the listing segments were labelled "primary" and "secondary" rather than "premium" and "standard"). A standard listing involves the issuer having to meet EU directive minimum standards rather than the more onerous standards that apply to issuers with a premium listing. For further details on the differences, see Practice note, Differences between a premium and standard listing of shares.
Listing segment of IPOs in 2010
So far, of the IPOs of UK incorporated companies within the What's Market database, only Horizon Acquisition Company plc has sought a standard rather than premium listing of its shares under Chapter 14 of the Listing Rules. In addition, none of the UK incorporated companies that transferred to the Main Market from AIM has sought a standard listing.
As a newly incorporated company, formed to acquire an (as then) unidentified target company or business, Horizon was not eligible for a premium (at the relevant time, primary) listing. It did however state an intention to seek a primary/premium listing following the acquisition based on the three year historical financial track record of the target business or company and subject to meeting the other eligibility requirements. It also set out in the prospectus a limited number of obligations, based on certain of those that apply in the case of a premium listing, with which it intended to comply on a voluntary basis. This includes the Listing Principles in Chapter 7 of the Listing Rules, the UK Corporate Governance Code (to the extent considered applicable) and a policy consistent with the provisions of Listing Rules 12.4.1R and 12.4.2R in relation to share buy backs. It also stated an intention to seek specific approval from the independent non-executive directors for any transaction that would constitute a related party transaction under the Listing Rules.
Of the non-UK incorporated IPOs involving the listing of shares (rather than GDRs, which are not eligible for a premium listing) and included in the What's Market database, in 2010 only Vallar Plc, and so far in 2011 only Justice Holdings, listed their shares under the standard listing segment. Like Horizon, both of these companies were newly incorporated acquisition vehicles which were not eligible for a premium listing. Both also stated an intention to seek a premium listing following the relevant acquisition and to comply with limited additional obligations on a voluntary basis.
Listing segment of transfers from AIM to the Main Market
Shares of three of the non-UK incorporated companies that transferred from AIM to the Main Market during 2010 were admitted to a standard, rather than premium, listing. Each of these companies (KSK Power Ventur plc, Entertainment One Ltd. and Medusa Mining Limited) stated an intention to comply with certain additional obligations to those that apply to companies under Chapter 14 of the Listing Rules.
In the case of Entertainment One and KSK Power Ventur, these additional obligations included the Listing Principles, certain obligations relating to the publication of preliminary results and half yearly reports, notifications regarding distributions and dividends and the requirement in Listing Rule 5.2.5R for shareholder consent for a cancellation of listing. All three of the companies agreed to continue to conduct their activities as if the requirements of the AIM Rules for Companies in relation to substantial transactions, related party transactions, reverse takeovers and fundamental changes of business continued to apply. For further details of these requirements, see Practice note, AIM: continuing obligations.
Other issues
Other points to note in relation to the IPOs included in the database for 2010:
- Underwriting. Most of the IPOs were fully underwritten. Those that were not include Horizon, Metric Property Investments plc, SuperGroup PLC, Fidelity China Special Situations plc, JPMorgan Global Emerging Markets Income Trust plc and John Laing Infrastructure Fund Limited.
- Commission payable by the issuer in underwritten IPOs. Commissions payable by the issuer in respect of the issue of new shares in an underwritten IPO (where expressed as a percentage of the proceeds of the offer) ranged from 1.75% (O'Key Group S.A.) to 3.5% (African Barrick Gold plc), excluding any commission payable on a discretionary basis. Additional discretionary amounts were disclosed in certain cases, including for all of the IPOs of UK incorporated companies where underwriting commission was payable by the issuer. The discretionary amounts disclosed ranged from up to 0.5% (CPPGroup Plc) to up to 1.5% (Flybe Group plc). After the maximum discretionary commission was included, the commission payable by the issuer ranged from between 2.75% (O'Key Group) to 4.05% (African Barrick).
- Commission payable by the selling shareholders in underwritten IPOs. The commissions payable by selling shareholders in respect of the sale of existing shares in the offer (where disclosed separately and expressed as a percentage of the proceeds) were generally equal to that payable by the issuer in respect of the new shares. It did vary significantly in the CPPGroup IPO. The commission payable by the selling shareholders (other than the controlling shareholder) was an amount equal to 1.75% of the proceeds of the sale of the existing shares sold by them with no discretionary element, whereas the amount payable by the issuer and the controlling shareholder was equal to 3% of the proceeds of the new shares issued or existing shares sold (as applicable) with an additional discretionary amount of up to 0.5%.
- Aborted IPOs. During 2010 a number of Main Market IPOs were postponed following announcement of their intention to float. These included Travelport Holdings (Jersey) Limited, New Look Group plc, UralChem Holding P.L.C., Ferrous Resources Limited and Fairfield Energy plc.
Activity on AIM also increased in 2010 with 25 new admissions involving an issue of shares with a market capitalisation on admission of £25 million and above compared to just five such admissions in 2009. A further 11 companies transferred to the Main Market from AIM during 2010.
What's Market contains details of all these deals and links to the public documents where available. For details of all deals recently added to What's Market, see Recent deals published on What's Market (UK).