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Potential UK IPO market changes – what are they and why do they matter?

What is the FCA's recent consultation on encouraging companies to list in the UK and why does it matter?

Important information - This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

According to the Financial Conduct Authority (FCA), they want stronger public markets because it will “increase the opportunities for investors to share in that growth which helps spread wealth.” Reforms are needed since the Initial Public Offering (IPO) market in the UK is flagging.

Investing in IPOs, share offers, and individual companies isn’t right for everyone. It’s a higher-risk way to invest your money. When a company first lists on the stock market, its share price can rise and fall quickly. If the company fails, you could lose your whole investment. You should make sure you understand the companies you’re investing in and their specific risks. You should also make sure any shares you own are part of a diversified portfolio. If you’re not sure if an investment’s right for you, ask for personal financial advice.

Why are IPOs important?

The UK listings market has been shrinking for a while. According to the UK Listing Review, the number of listed companies in the UK in 2020 had fallen by about 40% from a peak in 2008.

While the UK has a lot of strong technology and life science companies, only a few have come to the public markets in recent years. Between 2015 and 2020, the UK accounted for only 5% of IPOs globally.

Change is needed to help encourage a bigger range of companies to list in London. To remedy this and boost UK growth, the FCA launched a consultation in 2023.

What’s suggested in the FCA reforms?

Some of the key takeaways

  • A single category for listing shares

  • Making it easier for companies to list by removing some eligibility rules

  • Improving company disclosures, putting more information in the hands of investors

The current proposals could increase the possibility of companies being unable to meet these demands. But the changes could also better reflect the risk appetite the economy needs to achieve growth. The FCA says they have consulted with all sides of the market, and are hearing opinions on these proposals before a final decision is made.

Is there demand from retail investors?

We’ve evolved our partnerships with four technology platforms because of this. So our clients now have the widest possible access to IPOs, follow-on offers and blocks just like institutional investors. Because of these changes, our clients were involved in three times as many follow-on offers in 2023 as they were in 2021.

As rules around listings are now being revisited, we’re hoping that the FCA prioritises improving access. If retail investors are given equal access to these markets, reforms should see that it’s as easy to issue to retail investors as it is to wholesale markets. But it’s important to remember that prices can move up or down very quickly after these kinds of offers, adding risk. Any shares you buy should be part of a diversified portfolio.

With IPO numbers shrinking, it’s important access to future listings for retail investors is still a priority. This includes increasing awareness on upcoming or potential IPOs and share offers, like the NatWest retail share offer mentioned in the 2023 Autumn Statement.

Retail share offers tend to happen very quickly, with little notice. Sign up for our alerts to stay up to date with the latest news, including:

  • If the UK government confirms plans to sells NatWest to retail investors

  • If you can take part in the retail share offer

You’ll also get helpful tips and information on what to think about when investing in shares, plus news on selected interesting IPOs.

Our NatWest alerts are for people who understand the risks of investing in shares and are not personal advice. You should only consider investing if you’re free from significant debt (other than a mortgage) and have sufficient savings in an easily accessible account to cover emergencies.

For now, the rumour mill of potential companies keeps churning. We recently looked at 5 Rumoured IPOs for 2024.

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Written by
Laura Burridge
Laura Burridge
Client Initiatives and Trading Lead

Laura specialises in all things financial planning with over 6 years' experience. She covers a wide range of topics, including top tips for inheritance tax planning, retirement and growing wealth.

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Article history
Published: 23rd January 2024