The revised Principles were published on 4 November 2022 in response to last year’s UK Secondary Capital Raising Review which, among other things, recommended that listed companies should have the ability to conduct smaller fundraisings more quickly and cheaply on the UK’s capital markets with greater flexibility for issuers. For a summary of the key changes, see below.

Minority take-up of increased headroom

In the midst of a busy 2023 AGM season, early indications are that whilst a number of listed companies have sought the increased maximum headroom for new issues in the coming year, a significant number have been more reticent, opting instead to continue to seek authorisations in line with the guidance in the previous 2015 Principles.

In a sample of 100 AGM notices published by FTSE 350 companies since January 2023, the following trends were identified:

Our analysis

It is surprising that more listed companies have not sought the greater flexibility to raise equity capital this year, particularly given current bank lending conditions and the apparent market support for greater flexibility in the UK’s pre-emption regime. Indeed, our analysis of the sample data indicates that a greater proportion of FTSE 100 companies opted not to seek the increased headroom this year, suggesting that there is more sensitivity around pre-emption rights amongst the shareholder base of larger companies or perhaps less of a need to seek increased flexibility for future equity raises than the rest of the FTSE 350.

Additionally, key shareholders might have expressed a stronger preference for issuers to consider potential share buy-backs (generating greater value for investors) this year, rather than to pursue further fundraisings for potential M&A activity in a challenging global economy. Whilst companies might be taking a cautious approach this AGM season – the increased flexibility to raise more equity capital is likely to be a useful option and further utilised in future years.

Revised Principles: Summary of key changes