Banks’ Grip on UK IPOs Loosens – Bloomberg

The days of a huge first-day share pop may be coming to an end for London IPOs.

From this week, bankers managing initial public offerings in the U.K. face new rules designed to reduce their influence after a series of high-profile stock sales that were perceived as mispriced. The key issue is giving stock buyers and neutral analysts enough time with financial information to think about what the true price should be.

As things stand, analysts at banks running a share sale get access to the company’s books well before “unconnected” analysts, who get a prospectus only shortly before the sale. Under rules from the Financial Conduct Authority that apply from July 1, investors and analysts will get much earlier access to key information.

“It’s a helpful reform and it’s being done for the right reasons,” said Mark Phelps, chief investment officer of global concentrated equities at AllianceBernstein in London. “The buy side is always skeptical of sell-side analysts working for the company on an IPO. In all the years I’ve been doing this, I’ve never seen a negative report from a connected party.”

Commodities giant Glencore International Plc hired 23 banks to take it public in 2011. The stock is more than 30 percent below its IPO price after peaking shortly after the sale..

Royal Mail

An opposite situation occurred during the privatization of Royal Mail Plc in October 2013. The threat of a strike prompted a valuation that was shown to be too low after the stock, priced at 330 pence, jumped almost 40 percent on the first day of trading. It continued to rise thereafter, prompting accusations the banks had sold public assets to their friends in the City on the cheap.

“It appears that the taxpayer has missed out on significant value,” lawmakers wrote in a report on the sale.

Banks’ Grip on UK IPOs Loosens – Bloomberg

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