Coronavirus (COVID-19)—trends in secondary equity fundraisings

Coronavirus (COVID-19)—trends in secondary equity fundraisings

 This analysis considers the initial impact of the coronavirus (COVID-19) crisis on a sample of fundraisings by Main Market and AIM companies in the seven week period between 1 April and 20 May 2020.

Background

While the coronavirus (COVID-19) crisis has brought IPOs to a standstill, the secondary fundraising market has been active as companies seek to raise funds to bolster their balance sheets and provide working capital flexibility. This analysis looks at secondary equity fundraisings by listed and AIM companies raising at least £10 million in the seven week period between 1 April and 20 May 2020.

Regulatory constraints on equity fundraising

Public companies seeking to raise funds via an equity fundraising are subject to a number of constraints imposed by company law and regulation which will dictate the fundraising structure they are able to use and time taken to completion.

An equity fundraising may trigger the requirement for a prospectus to be published which will add considerably to the cost and length of a transaction. A public company wishing to offer shares to the public or have shares admitted to trading on the Main Market of the London Stock Exchange must publish an FCA approved prospectus unless an exemption applies. A company wishing to do a quick fundraising will structure the transaction to fall within relevant exemptions under the Prospectus Regulation, for example an offer to institutional investors only of up to 19.99% of its issued share capital. However a large pre-emptive fundraising will require a prospectus.

Consideration must also be given to whether sufficient shareholder authority to allot shares and (when issuing shares for cash) disapply statutory pre-emption rights under the Companies Act 2006 is in place. Listed and AIM companies usually obtain these shareholder authorities on an annual basis at their annual general meeting however if a company has already used up its authorities during the year or wishes to issue shares in excess of the current authority it will need to call a general meeting

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Market Tracker is a unique service for corporate lawyers housed within Lexis®PSL Corporate. It features a powerful transaction data analysis tool for accessing, analysing and comparing the specific features of corporate transactions, with a comprehensive and searchable library of deal documentation across 14 different deal types. The Market Tracker product also includes news and analysis of key corporate deals and activity and in-depth analysis of recent trends in corporate transactions.