IR Monitor – 19th April 2021

This week’s news

Hot SPAC Market Could Freeze After Potential SEC Rule Change

SPACs had a record-breaking year in 2020 and continued to boom in 2021. However, the SEC’s new regulation around accounting could put a temporary hold on the booming industry. According to Forbes, many investment banks are anticipating that the U.S. government will change the classifications of SPAC warrants from an equity on the balance sheet to a liability. These warrants play a significant role as a ‘goodie-bag’ for investors that provide potential windfalls without risking much capital. Some experts believe this move has been intentionally crafted to slow the rate at which the SPAC market is growing.

UK records strongest opening quarter IPO performance in 14 years

According to research conducted by EY, the UK’s Q1 results for IPOs indicate that more funds were raised in the opening quarter of 2021 than in any other opening quarter since 2008. Total funds raised were £5.2 billion on the main market and £441 million on the alternative investment market. This equates to more than half of the total £9.4 billion raised in the whole of 2020. City A.M. has also noted that the UK was able to maintain its position as the lead listing location in Europe for fund raising and third behind the US and China on a global basis. Overall, Global IPO markets have had the best Q1 start in the 20 years, with over $65 billion raised in over 300 IPOs.

Foreign takeover rules on national security eased 

The Times has reported that there will be an amendment to the National Security and Investment Bill that was designed to protect the national security of British companies targeted by foreign investors. Ministers propose increasing the threshold (at which point a new government agency is to be notified of foreign investor buying) from 15% of a company to 25%. The rules are to be loosened after it was concluded by the government that they could negatively affect overseas investment in the UK. It appears that Business Secretary Kwasi Kwarteng listened to concerned voices, including the CBI, who believed the rules would unnecessarily delay acquisitions that pose no real risk to national security and in doing so deter foreign investors.

Hungry for Investors, Some Companies Woo the Little Guy

Small investors are becoming a force in the stock market, the New York Times has reported, and company executives are looking to cultivate them. As the stock holdings of American households have soared to a record level over the past year, dozens of companies are suddenly paying more attention to individual investors. This marks a U-turn from recent trends, as small investors who buy single stocks have not been a major force in financial markets for the better part of half a century. The pandemic has been the catalyst for this increase and with millions of Americans stuck at home the trading trend escalated. Some companies are trying to transform newly minted traders of “meme stocks” like GameStop into dedicated shareholders. And some of those meme stock companies, including GameStop itself, have taken advantage of the demand to issue new shares, turning trading enthusiasm into actual cash for the company.

CEO activism in America is risky business

Businessmen no longer hold their tongues on political matters these days, the Economist has reported.  The magazine notes that on 14th April hundreds of US companies, including giants like Amazon and Google (and big-name businesspeople, among them Warren Buffett) published a letter opposing “any discriminatory legislation” making it harder to vote. The trouble with such CEO advocacy, warns the Economist, is a lack of clarity about its motivations and impact—on the issues themselves, as well as on the businesses in whose name it is undertaken. Furthermore, corporate activism can backfire if it causes the party against which it is directed to dig in its heels.  Chief executives claim that they simply have no choice but to tackle societal concerns because in the age of social media their customers, employees and shareholders demand it. However (according to the Economist) the evidence for such assertions is mixed, with the magazine noting that attempts to pinpoint the motivations of both employees and consumers sheds little clarity on the matter.

And finally… On tickers

Coinbase Global, the big cryptocurrency exchange, went public last week in a widely-reported direct listing that ended up valuing it at about $86 billion. Perhaps less well known is CFO Alesia Haas’ admission that one of the reasons that the company picked Nasdaq was because the bourse offered the ticker symbol “COIN,” which wasn’t part of the New York Stock Exchange’s pitch. Matt Levine has noted in Bloomberg that finance is not especially rational these days, and investors want a good ticker, so you have to give them one. He notes further that there is nothing to stop an exchange from squatting on a ticker and saying to the company “hey, if you want the only logical ticker, you gotta go with us.” What a strange competition.

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