In the end, 2013 did not disappoint. With resurgence in equity offerings, promising company valuations and greater market liquidity, it's no wonder that some were keen to label 2013 as the 'year of the come-back' for listings on the global capital markets.
High profile IPOs on both sides of the Atlantic dominated the headlines throughout the year, as both retail and institutional investors rushed to subscribe for stakes in popular household brands. This year's volume and value of listings in the UK far overshadowed those in 2012, which was a difficult year for IPOs and secondary listings in Europe. Private equity houses were also keen to bank their share of the renewed optimism, choosing to exit their long held assets via IPOs on the UK equity markets.
What's on the horizon for 2014?
Rallying markets indicate increased consumer confidence, which in turn, suggests that economic recovery beckons. The momentum of activity is likely to continue in 2014. Several companies have announced that they are getting their house in order for an IPO in Q1 of 2014, and if successful, we expect to see a wide range of companies jumping on the IPO bandwagon later in the year.
Company valuations will be critical to maintaining the 'bullish' market. Realistic valuations and a strong after-market will attract investors and should encourage tentative companies to pursue public offerings. Whilst the outlook looks good, there remain possible threats on the global horizon which cannot be ignored. At some point, the US Federal Reserve will have to reduce its economic stimulus measures, which is likely to have some impact on the global stock markets. Further, we cannot ignore the stagnant economic growth in certain parts of Europe, the effects of which may slow down the rate of recovery across the EU.
Regulation, regulation, regulation
What we do know for certain is that regulatory change will continue to dominate the markets next year. We expect the FCA to continue to review, consult and update its material in the UKLA's Knowledge Base, particularly in light of its new objectives following changes to the regulatory regime earlier this year. Meanwhile, ESMA will pursue its objective to harmonise regulation across the EU financial markets.
Changes to the UK Listing Regime
In particular, we are preparing for the revised UK Listing Regime to take effect next year. The FCA expects to implement its proposed changes by mid-2014. The package of new measures is designed to afford enhanced protections to minority shareholders of premium listed companies where there is a controlling shareholder, whilst seeking to maintain the competitiveness of the UK markets. Click here to read our summary of the proposals.
More guidance is also expected from the ABI in 2014, following its report 'Encouraging Equity Investment' published in July. The ABI made several recommendations relating to the deal process for IPOs and secondary offerings in the UK, including the shortening of the established 'black-out period'. In particular, the ABI indicated that it will clarify its existing guidance on non- pre-emptive placings, open offers and rights issues. Click here to read our comments on the report.
European regulation continues to evolve at a rapid pace. The changes to the market abuse regime are being negotiated, with the adoption of the final text of the new Market Abuse Regulation on hold, so that it can be aligned with the text of MiFID II, once finalised. Meanwhile, ESMA is consulting on possible implementing measures for the new market abuse regime, following which it will publish its proposed regulatory technical standards for consultation next year. Additionally, ESMA should publish its feedback and final regulatory technical standards on events requiring the publication of a supplementary prospectus in the coming months. Watch this space – as usual, we will keep you informed of the latest key developments.
Enjoy the holidays – we will see you next year!
So as we approach the festive season, we will anticipate with optimism what 2014 has in store for the UK capital markets. In the meantime, Seasons' Greetings to you and your families from the Hogan Lovells ECM practice. We will see you next year – we have a feeling it will be a busy one!