Pre-Emption Group (PEG) extends the easing of its issuance guidelines

This blog gives you the latest topical news plus some informal comments on them from ShareSoc’s directors and other contributors. These are the personal comments of the authors and not necessarily the considered views of ShareSoc. The writers may hold shares in the companies mentioned. You can add your own comments on the blog posts, but note that ShareSoc reserves the right to remove or edit comments where they are inappropriate or defamatory.

Cliff Weight, Director, ShareSoc gives his personal views below which may not necessarily reflect ShareSoc’s view.

UK-listed companies hit by Covid-19 are being given an additional lifeline as the Pre-Emption Group (PEG) extends the easing of its issuance guidelines, allowing more share capital to be raised from shareholders.

The PEG, the affiliate of the Financial Reporting Council that provides guidance on fundraisings and rights issues, has confirmed that the additional flexibilities put in place at the height of the pandemic will be extended for a further two months.

Now running to November 30, 2020, the PEG has recommended that investors continue to back placings by companies of up to 20% of their issued share capital over a 12-month period. The group added that the considerations should be done on a case-by-case basis.

The flexibility was originally introduced as a temporary measure on April 1, 2020, and the extension provides companies with more time to assess any unforeseen financial and cashflow consequences relating to Covid-19.

The PEG said the extension of the additional flexibility was aimed at the “developing pipeline of equity offerings over the third quarter” – traditionally a busy time for the market as investors return from their summer break.

After November 30, it is expected that companies will return to the original Statement of Principles under which companies can raise up to 10% of additional share capital without shareholder approval.

Since the start of the year, £23.7bn has been raised in the UK market with more than 125 of the issuances coming from companies accessing emergency funds in order to survive the coronavirus crisis.

The PEG said this has generally been at a small discount to the market price, adding that stakeholder interests have, in the majority of cases, remained at the forefront of company decision-making.

However, PEG has stressed that companies should only make use of the relaxation of the guidelines if they are experiencing extreme circumstances, and issuance is required to fund an immediate concern.

Companies must also set out details of how shareholders will be supported as well as taking into consideration how retail investors are likely to be impacted.

Given the success of the additional flexibility, the PEG has confirmed it will engage with the Financial Conduct Authority, Treasury and other market participants on possible changes that could make for a more effective and competitive market in the future.

ShareSoc intends to lobby for the removal of the €8m limit on placings and for individual investors to be given fair access to placings. ShareSoc is very worried about placings which allow directors, friends, advisers and advisers clients preferential treatment compared to other investors.

One comment
  1. Alan Selwood says:

    “ShareSoc is very worried about placings which allow directors, friends, advisers and advisers clients preferential treatment compared to other investors”.

    Agreed!

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