6th July 2021
Good morning It’s official, from 19 July masks and social distancing will no longer be mandatory in England, other key changes will be:
- All businesses, including nightclubs, can reopen.
- Table service rules at bars and restaurants and venue check-in requirements will be scrapped.
- Capacity limits for concerts, theatres and sports events will also be removed.
- Guidance instructing people to work from home where possible will be lifted.
- Rules relaxation to attract tech IPOs
- Are British companies being sold on the cheap?
Yesterday's market moves
FTSE 100 +0.6% 7,165
FTSE 250 +1.2% 23,022
Markets were in an upbeat mood with the FTSE 250 (+1.2%) hitting a new all-time high. The FTSE 100 was also up 0.6% driven by the expectation that Boris would confirm the economy will fully re-open on 19 July (which he did).
Rules relaxation to attract tech IPOs
What’s going on?
The financial services watchdog (the FCA) is considering easing the rules for initial public offerings (IPOs) to make London more attractive to tech firms looking to go public.
Why is this important?
London has experienced serious FOMO in the last few years when it comes to public listing debuts.
Between 2015 and 2020 the UK accounted for less than 5% of IPOs globally, whereas the US had 40%.
The FCA is trying to make London the place to IPO so it’s launched a consultation to assess whether rules should be relaxed around how easy it is for entrepreneurs to keep control of their business once they go public - especially important for high growth tech firms:
- Dual class shares are when there are two separate sets of shares, one to Joe public which typically have limited or even no voting rights, and the other which is kept by founders and top exec that have more say in voting processes. At the moment there are strict rules on this that make it hard for entrepreneurs to sell shares in an IPO while keeping control of their business. The FCA wants to ease these rules.
- Proposals to cut the amount of shares in a floated business that must be in public hands from 25% to 10%. Again this would mean that the entrepreneur would keep more control of their company when they go public.
The FCA says that becoming more appealing to businesses for public listings will create economic growth and jobs for the UK economy.
But critics argue that the current strict rules are what makes London attractive in the first place and are there to protect investors.
The FCA is not hanging about with the plans. It will consult for less than three months and put in place new rules before the end of this year.
Are British companies being sold on the cheap?
The current bidding war for the supermarket Morrisons has sparked a debate over whether British companies are being undervalued.
Yesterday another US private equity firm, Apollo, threw its hat in the ring and is considering putting in an offer for the UK’s fourth largest grocer.
British stock markets have fallen behind peers since 2016 when the Brexit vote created uncertainty over the future of the economy. This then worsened during the pandemic.
According to Bloomberg the FTSE 250 trades at a forward 2022 price-earnings ratio – that’s a measure of value - of 16x, compared with 20x for the US S&P 500 and 19x for the MSCI World Index.
This relative cheapness has made this year the busiest in 20 years for private equity firms bidding for UK public companies.
Legal & General, the UK’s largest asset manager and investment giant Schroders have been among the investors calling for greater scrutiny over these deals. And they are not alone in their concerns. The Labour party has called for government intervention to ensure British interests like jobs and security are protected. However, a spokesman for Boris Johnson on Monday said it was a “commercial matter for individual businesses”.
It’s unsurprising that the government isn’t keen to step in. It doesn’t want to discourage the investment that private equity firms bring to the economy.
However as more high profile names like Morrisons become takeover targets it’s likely that concerns will continue to grow that British companies are falling into the wrong hands.
Stat of the day
The number of people over the age of 65 – the retirement age in a number of major economies – is projected to double by 2050
Other stories to keep you in the loop