DOCSLIB.ORG

A Historical Sociology of London's Smaller Company Markets

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
A Historical Sociology of London's Smaller Company Markets The rise and fall of the penny-share offer: A historical sociology of London’s smaller company markets Dr Philip Roscoe School of Management The University of St Andrews The rise and fall of the penny-share offer: A historical sociology of London’s smaller company markets Dr Philip Roscoe School of Management The University of St Andrews page 1 Philip Roscoe ©Philip Roscoe School of Management The University of St Andrews The University of St Andrews is a charity registered in Scotland: No SC013532. page 2 Contents 1. Summary findings . 5 2. Introductory remarks . 8 3. Dog tracks and matched-bargains. 10 . 3.1. Gorgonzola Hall . 10 3.2. S Jenkins & Son. .15 . 3.3 Big Bang . 19 . 4. Regulation, technology, and the birth of OFEX. 23. 4.1 OTC, USM and Third Market. .23 . 4.2 Formalizing 535.2: J P Jenkins Ltd. 29. 4.3 The market’s ‘place’ . .35 . 5. Elite lobbying and the AIM? . .44 . 5.1. ‘Firestorm’ . 44. 5.2. Building a market . 52 5.3 Privatized regulation . 55 . 6. 1995 to 2000: Dotcom bubble and IPO boom . 62 6.1 The advisory ecosystem and raising funds on OFEX . .66 7. Bear market travails and the end of OFEX . 71 . 7.1. The decision to float on AIM . 74 7.2. The Jenkins family loses control. 79 . 8. From 2004 to 2010: Markets at war. 82 8.1. AIM’s change of direction. 83. 8.2. The new contender – PLUS Markets . 88 8.3. Project Tortoise. .95 . 8.4. Head to head with AIM. .98 . 9. Decline and fall: the final days of PLUS . 102 . 10. Afterword: Changing AIM. 107. 11. Timeline of relevant events. .113 . 12. Appendix i: Interviewees . 115. 13. Appendix ii: References. 117 . page 3 Philip Roscoe page 4 1. Summary findings 1. The history of the UK’s smaller company stock markets shows an ongoing, though cyclical, demand for growth funding and share trading mechanisms (on the part of companies) and investment opportunities (on the part of retail investors and institutions). Skilled, entrepreneurial intermediaries have exploited the opportunities presented by this two-way flow of supply and demand. These intermediaries comprise a financial ecology essential to the effective functioning of the markets; equally, an effective financial ecology must be anchored to the institution of a viable and trusted stock market. 2. Markets are historically and materially embedded entities. They take a particular form as a result of historical forces and material constraints: organisational path dependencies, regulatory changes, advances (or otherwise) in technological systems and market infrastructure, reactions to external stimuli and competitive pressures, and the personal projects and interests of individuals. The distinctive regulatory shape of AIM is an example of one such path dependency, and the launch of OFEX another. The social and cultural contexts in which the exchanges were launched and operate have also been influential in shaping the markets. Recognising path dependencies as the source of institutional form can facilitate discussion over appropriate organisational changes as and when necessary. 3. Market architectures, cultures and trading mechanisms give rise to distinctive kinds of ‘ethics of office’ among participants. Examples are the code of practice among those apprenticed as blue buttons on the floor of the old London Stock Exchange, or the project-based frame of reference of classroom-educated MBAs. These value systems have shaped the developing markets and clashes between them underlie some of the most bitter disputes in my history. 4. AIM has achieved a critically important position in the financial infrastructure of UK plc, raising over £100 billion of investment in the primary and secondary markets. Nonetheless, there are growing strains within the system, notably in terms of regulatory pressures on nominated advisers and a regulatory ambivalence towards retail investors. An over-cautious regulatory stance does not necessarily reflect the realities of growth funding mechanisms, especially in the face of ongoing demand for investment opportunities among the general page 5 Philip Roscoe public. Should regulatory activity make retail investment in small company stocks unrealistic, those demands are likely to be satisfied in other, less reputable fora. 5. Academic research has highlighted the importance of high-growth firms (gazelles) with certain characteristics, notably maturity and heterogeneity of industrial sector. AIM, in its more mature form, has a constituency manifesting these characteristics. Research has also drawn attention to the importance of physically located entrepreneurial ecosystems. It should be noted that the AIM community comprises one such ecosystem in itself, and supports many others through the provision of legitimacy, publicity and financial support. 6. Launching AIM constituted a radical change for the conservative and risk averse London Stock Exchange. It is now clear that the reputation, institutional solidity, and infrastructure of the Exchange have been crucial factors in the success of AIM. My study suggests that there is only room for one full scale growth market in the British economy, and that more benefits accrue from the concentration of trading activity than from the fragmentation required by competition. The Exchange therefore has a heavy responsibility in terms of stewardship of this national resource for the future. 7. The ongoing enthusiasm of financial intermediaries and their clients for earlier-stage sources of funding indicates that AIM should be supplemented by a variety of transparent and clearly supervised funding mechanisms appropriate for growing businesses that are not yet ready for a full market listing. Structural factors suggest that ‘dual-capacity’ arrangements, where market-making revenues subsidize market infrastructure, may be viable here. These would need to be well regulated, but the example of JP Jenkins and OFEX shows that such ‘markets’ can be beneficial for growing firms. Technological innovations linked to more localised economic activity (for example algorithmic micro-exchanges for locally crowd funded start-ups) also offer promising solutions. The London Stock Exchange has been historically supportive of noncompeting funding mechanisms, which it views as feeders for its own business. 8. Technological and regulatory developments, notably the Internet, have concentrated financial ecologies in bridgehead cities such as London. This is neither necessarily desirable nor in keeping with the political page 6 Summary findings aspirations and responsibilities of a national small company market. The perspective of British enterprise – an important political and rhetorical motif in this story – demands mechanisms to reinvigorate issuer activity in Scotland, Wales and the English regions. Growing infrastructure costs and associated economies of scale suggest that ‘white label’ serviced offered by large providers may be a more effective solution than de novo start-ups. 9. It should be stressed that AIM is a stock exchange of a distinctive kind: it is a mechanism for fundraising and stock trading growth companies. Trading mechanisms have evolved to reflect the natural irregularity in supply and demand of stock. Supervisory mechanisms delegate oversight to corporate advisors with close knowledge of the companies in question. Maintaining effective supervision through mechanisms based on reputation and social networks poses a key challenge to the exchange going forward. 10. Finally, my study also shows that stock markets are simply talked into being. Infrastructure, an appropriate regulatory environment and underlying demand are necessary but not sufficient conditions for the successful formation of a market. Markets reflect the collective commitment of participants acted out through multiple, ongoing conversations, and successful market innovations stem from a collective recognition that change is due. We may soon be at another such moment, with Brexit and the aftermath of austerity necessitating a refocusing of our national economic intellect. Smaller company stock markets – and trading mechanisms for even earlier-stage equity finance – should form an increasingly important part of that conversation. page 7 Philip Roscoe 2. Introductory remarks The following pages offer a ‘historical sociology’ of two markets established in London in 1995 in response to a series of rule changes at the London Stock Exchange (LSE). The first, the Alternative Investment Market, or AIM, was set up by the LSE. It was established as part of LSE chief executive Michael Lawrence’s ‘seven-point plan’ for the repositioning of the Exchange as an engine for economic growth focused on the UK regions. AIM was also, in part, a reactive move allowing the Exchange to deal with competitive threats in Europe and at home, particularly growing activity under its own Rule 535. It has acted as a proving ground for many smaller companies and plays an important role in the political positioning of the LSE. The second, OFEX (renamed PLUS in 2004) was privately operated and driven by commercial demand. Originally operated as a trading facility, it achieved legal recognition as a ‘designated market’ in 2001, and then as a Recognized Investment Exchange (RIE) in 2007. As OFEX it coexisted with the LSE and rode the dotcom wave; as PLUS it served as a vehicle for a market rebellion against the LSE. It struggled to maintain a commitment to its original small company constituency and to compete as a trading venue of choice against the Exchange. While AIM has flourished, PLUS faltered after the financial crisis of 2008, and my narrative finishes in 2012 with the sale of the PLUS RIE licence to ICAP, now NEX. I suggest that the sociology of these exchanges is rooted in the interactions on the old floor of the LSE prior to the 1986 ‘Big Bang’ and my narrative begins there. The first section, ‘Dog tracks and matched bargains,’ discusses the period up to the stock market crash at the end of the 1980s. I then discuss the regulatory and technological path dependencies that led to the inception of OFEX in 1995 (‘Regulation, technology, and the birth of OFEX’), and the elite political lobbying in response to these changes that led to the foundation of AIM (‘Elite lobbying and the AIM?’).
Load more

Recommended publications
  • Market Structure and Liquidity on the Tokyo Stock Exchange
    This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research Volume Title: The Industrial Organization and Regulation of the Securities Industry Volume Author/Editor: Andrew W. Lo, editor Volume Publisher: University of Chicago Press Volume ISBN: 0-226-48847-0 Volume URL: http://www.nber.org/books/lo__96-1 Conference Date: January 19-22, 1994 Publication Date: January 1996 Chapter Title: Market Structure and Liquidity on the Tokyo Stock Exchange Chapter Author: Bruce N. Lehmann, David M. Modest Chapter URL: http://www.nber.org/chapters/c8108 Chapter pages in book: (p. 275 - 316) 9 Market Structure and Liquidity on the Tokyo Stock Exchange Bruce N. Lehmann and David M. Modest Common sense and conventional economic reasoning suggest that liquid sec- ondary markets facilitate lower-cost capital formation than would otherwise occur. Broad common sense does not, however, provide a reliable guide to the specific market mechanisms-the nitty-gritty details of market microstruc- ture-that would produce the most desirable economic outcomes. The demand for and supply of liquidity devolves from the willingness, in- deed the demand, of public investors to trade. However, their demands are seldom coordinated except by particular trading mechanisms, causing transient fluctuations in the demand for liquidity services and resulting in the fragmenta- tion of order flow over time. In most organized secondary markets, designated market makers like dealers and specialists serve as intermediaries between buyers and sellers who provide liquidity over short time intervals as part of their provision of intermediation services. Liquidity may ultimately be pro- vided by the willingness of investors to trade with one another, but designated market makers typically bridge temporal gaps in investor demands in most markets.' Bruce N.
    [Show full text]
  • Initial Public Offerings
    November 2017 Initial Public Offerings An Issuer’s Guide (US Edition) Contents INTRODUCTION 1 What Are the Potential Benefits of Conducting an IPO? 1 What Are the Potential Costs and Other Potential Downsides of Conducting an IPO? 1 Is Your Company Ready for an IPO? 2 GETTING READY 3 Are Changes Needed in the Company’s Capital Structure or Relationships with Its Key Stockholders or Other Related Parties? 3 What Is the Right Corporate Governance Structure for the Company Post-IPO? 5 Are the Company’s Existing Financial Statements Suitable? 6 Are the Company’s Pre-IPO Equity Awards Problematic? 6 How Should Investor Relations Be Handled? 7 Which Securities Exchange to List On? 8 OFFER STRUCTURE 9 Offer Size 9 Primary vs. Secondary Shares 9 Allocation—Institutional vs. Retail 9 KEY DOCUMENTS 11 Registration Statement 11 Form 8-A – Exchange Act Registration Statement 19 Underwriting Agreement 20 Lock-Up Agreements 21 Legal Opinions and Negative Assurance Letters 22 Comfort Letters 22 Engagement Letter with the Underwriters 23 KEY PARTIES 24 Issuer 24 Selling Stockholders 24 Management of the Issuer 24 Auditors 24 Underwriters 24 Legal Advisers 25 Other Parties 25 i Initial Public Offerings THE IPO PROCESS 26 Organizational or “Kick-Off” Meeting 26 The Due Diligence Review 26 Drafting Responsibility and Drafting Sessions 27 Filing with the SEC, FINRA, a Securities Exchange and the State Securities Commissions 27 SEC Review 29 Book-Building and Roadshow 30 Price Determination 30 Allocation and Settlement or Closing 31 Publicity Considerations
    [Show full text]
  • China Client Alert
    China Client Alert Hong Kong Regulator issues Guidelines on IPO Cornerstone Investments Last month, the Hong Kong Stock Exchange ("HKEx") issued new guidelines for cornerstone investments (the “Guidance Letter”). In the Guidance Letter, HKEx sets out its general policies on IPO cornerstone investments and expresses its concerns over side arrangements made between cornerstone investors and listing applicants. Paul, Weiss Asia Offices Highlights of HKEx's policies on IPO Cornerstone Investments: A) Principles for Approving IPO Cornerstone Investments BEIJING Unit 3601, Fortune Plaza Office HKEx approves a preferential placing to cornerstone investors Tower A based on the following principles: No. 7 Dong Sanhuan Zhonglu Chao Yang District, Beijing 100020 • Placing price is at IPO price, People’s Republic of China • +86 10 5828 6300 IPO shares are subject to lock-up (at least 6 months), • Investor has no board representation, HONG KONG Hong Kong Club Building, 12th Flo0r • Investor is independent of listing applicant, its connected persons 3A Chater Road, Central and their respective associates, Hong Kong • Details of placing arrangements are disclosed in the prospectus, +852 2846 0300 and TOKYO • IPO shares are counted as part of the public float so long as the Fukoku Seimei Building investor is a member of the public under Hong Kong Listing Rules. 2-2, Uchisaiwaicho 2-chome Chiyoda-ku, Tokyo 100-0011, B) Reclassification of Cornerstone Investors as Pre-IPO Japan Investors +81 3 3597 8101 HKEx may reclassify a cornerstone investor as a pre-IPO investor if, with respect to acquisition of IPO shares, such investor (whether by way of side letters or otherwise): (i) receives any direct or indirect benefit (other than a guaranteed allocation of IPO shares), for example: • waiver of brokerage commission, • ©2013 Paul, Weiss, Rifkind, Wharton & put option for other person to buy back shares after listing, Garrison LLP.
    [Show full text]
  • Capital Market Theory, Mandatory Disclosure, and Price Discovery Lawrence A
    Washington and Lee Law Review Volume 51 | Issue 3 Article 3 Summer 6-1-1994 Capital Market Theory, Mandatory Disclosure, and Price Discovery Lawrence A. Cunningham Follow this and additional works at: https://scholarlycommons.law.wlu.edu/wlulr Part of the Securities Law Commons Recommended Citation Lawrence A. Cunningham, Capital Market Theory, Mandatory Disclosure, and Price Discovery, 51 Wash. & Lee L. Rev. 843 (1994), https://scholarlycommons.law.wlu.edu/wlulr/vol51/iss3/3 This Article is brought to you for free and open access by the Washington and Lee Law Review at Washington & Lee University School of Law Scholarly Commons. It has been accepted for inclusion in Washington and Lee Law Review by an authorized editor of Washington & Lee University School of Law Scholarly Commons. For more information, please contact [email protected]. Capital Market Theory, Mandatory Disclosure, and Price Discovery Lawrence A. Cunningham* L Introduction The once-venerable "efficient capital market hypothesis" (ECMH) crashed along with world capital markets in October 1987, but its resilience has nearly matched the resilience of those markets. Despite another market break in 1989, for example, the ECMH has continued to be reflexively heralded by numerous corporate and securities law scholars as an accurate account of public capital market behavior. Together with overwhelming evidence of excessive market volatility, however, these catastrophic market breaks revealed instinct infirmities m the ECMH that could hardly be shrugged off as mere anomalies. In response to the ECMH's eroding descriptive and prescriptive power, capital market theorists found in noise theory an auxiliary explanation for these otherwise inexplicable catastrophes.
    [Show full text]
  • Sargent's Court Reporting Service, Inc. (814) 536-8908 PUBLIC SERVICE COMMISSION of WEST VIRGINIA CHARLESTON * * * * * * * *
    PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON * * * * * * * * * Joan E. Sexton and Bervella * K. Mayhew * v. * 12-0926-W-C Pines Mobile Home Court * * * * * * * * * * HEARING TRANSCRIPT * * * * * * * * * BEFORE: KEITH A. GEORGE, Administrative Law Judge HEARING: Thursday, December 13, 2012 2:00 p.m. LOCATION: Hampshire Co. Courthouse Courtroom, 2nd Floor 66 N. High St, Romney WV Reporter: Barbara J. Jones Any reproduction of this transcript is prohibited without authorization by the certifying agency. Sargent's Court Reporting Service, Inc. (814) 536-8908 2 1 A P P E A R A N C E S 2 3 JOAN SEXTON, PRO SE 4 5 LEONA COLEMAN, PRO SE 6 7 DAWN ANDERSON, PRO SE 8 9 JOHN D. LITTLE, ESQUIRE 10 State of West Virginia 11 Public Service Commission 12 201 Brooks Street 13 P.O. Box 812 14 Charleston, WV 25323 15 Counsel for Staff 16 17 18 19 20 21 22 23 24 25 Sargent's Court Reporting Service, Inc. (814) 536-8908 3 1 INDEX TO WITNESSES 2 3 DISCUSSION AMONG PARTIES 8 - 12 4 WITNESS : JOAN SEXTON 5 TESTIMONY 6 By Ms. Sexton 12 - 20 7 DIRECT EXAMINATION 8 By Ms. Coleman 20 - 22 9 CROSS EXAMINATION 10 By Ms. Anderson 22 - 31 11 DISCUSSION AMONG PARTIES 31 - 33 12 WITNESS : STACY THOMPSON 13 DIRECT EXAMINATION 14 By Ms. Sexton 33 15 EXAMINATION 16 By Judge George 33 - 34 17 CROSS EXAMINATION 18 By Ms. Anderson 35 19 WITNESS : LEONA COLEMAN 20 TESTIMONY 21 By Ms. Coleman 36 - 55 22 CROSS EXAMINATION 23 By Ms. Anderson 55 - 69 24 25 Sargent's Court Reporting Service, Inc.
    [Show full text]
  • Equities: Characteristics and Markets I. Reading. A. BKM Chapter 3
    Lecture 3 Foundations of Finance Lecture 3: Equities: Characteristics and Markets I. Reading. A. BKM Chapter 3: Sections 3.2-3.5 and 3.8 are the most closely related to the material covered here. II. Terminology. A. Bid Price: 1. Price at which an intermediary is ready to purchase the security. 2. Price received by a seller. B. Asked Price: 1. Price at which an intermediary is ready to sell the security. 2. Price paid by a buyer. C. Spread: 1. Difference between bid and asked prices. 2. Bid price is lower than the asked price. 3. Spread is the intermediary’s profit. Investor Price Intermediary Buy Asked Sell Sell Bid Buy 1 Lecture 3 Foundations of Finance III. Secondary Stock Markets in the U.S.. A. Exchanges. 1. National: a. NYSE: largest. b. AMEX. 2. Regional: several. 3. Some stocks trade both on the NYSE and on regional exchanges. 4. Most exchanges have listing requirements that a stock has to satisfy. 5. Only members of an exchange can trade on the exchange. 6. Exchange members execute trades for investors and receive commission. B. Over-the-Counter Market. 1. National Association of Securities Dealers-National Market System (NASD-NMS) a. the major over-the-counter market. b. utilizes an automated quotations system (NASDAQ) which computer-links dealers (market makers). c. dealers: (1) maintain an inventory of selected stocks; and, (2) stand ready to buy a certain number of shares of stock at their stated bid prices and ready to sell at their stated asked prices. (a) pre-Jan 21, 1997, up to 1000 shares.
    [Show full text]
  • Skins Uk Download Season 1 Episode 1: Frankie
    skins uk download season 1 Episode 1: Frankie. Howard Jones - New Song Scene: Frankie in her room animating Strange Boys - You Can't Only Love When You Want Scene: Frankie turns up at college with a new look Aeroplane - We Cant Fly Scene: Frankie decides to go to the party anyway. Fergie - Glamorous Scene: Music playing from inside the club. Blondie - Heart of Glass Scene: Frankie tries to appeal to Grace and Liv but Mini chucks her out, then she gets kidnapped by Alo & Rich. British Sea Power - Waving Flags Scene: At the swimming pool. Skins Series 1 Complete Skins Series 2 Complete Skins Series 3 Complete Skins Series 4 Complete Skins Series 5 Complete Skins Series 6 Complete Skins - Effy's Favourite Moments Skins: The Novel. Watch Skins. Skins in an award-winning British teen drama that originally aired in January of 2007 and continues to run new seasons today. This show follows the lives of teenage friends that are living in Bristol, South West England. There are many controversial story lines that set this television show apart from others of it's kind. The cast is replaced every two seasons to bring viewers brand new story lines with entertaining and unique characters. The first generation of Skins follows teens Tony, Sid, Michelle, Chris, Cassie, Jal, Maxxie and Anwar. Tony is one of the most popular boys in sixth form and can be quite manipulative and sarcastic. Michelle is Tony's girlfriend, who works hard at her studies, is very mature, but always puts up with Tony's behavior.
    [Show full text]
  • Nasdaq Trader Manual
    Nasdaq Trader Manual Notice: This manual is in no way intended to be a substitution for, or relied upon in lieu of, the rules contained in the NASD Manual. The design and information contained in this manual are owned by The Nasdaq Stock Market, Inc. (Nasdaq), or one of its affiliates, the National Association of Securities Dealers, Inc. (NASD), NASD Regulation, Inc. (NASDR), Nasdaq International Ltd., or Nasdaq International Market Initiatives, Ltd. (NIMI). The information contained in the manual may be used and copied for internal business purposes only. All copies must bear this permission notice and the following copyright citation on the first page: “Copyright © 1998, The Nasdaq Stock Market, Inc. All rights reserved.” The information may not other- wise be used (not copied, performed, distributed, rented, sublicensed, altered, stored for subsequent use, or otherwise used in whole or in part, in any manner) without Nasdaq’s prior written consent except to the extent that such use constitutes “fair use” under the “Copyright Act” of 1976 (17 U.S.C. Section 107), as amended. In addition, the information may not be taken out of context or presented in a unfair, misleading or discriminating manner. THE INFORMATION CONTAINED HEREIN IS PROVIDED ONLY FOR THE PURPOSE OF PRO- VIDING GENERAL GUIDANCE AS TO THE APPLICATION OF PARTICULAR NASD RULES. ALL USERS, INCLUDING BUT NOT LIMITED TO, MEMBERS, ASSOCIATED PERSONS AND THEIR COUNSEL SHOULD CONSIDER THE NEED FOR FURTHER GUIDANCE AS TO THE APPLICATION OF NASD RULES TO THEIR OWN UNIQUE CIRCUMSTANCES. NO STATE- MENTS ARE INTENDED AS EXPRESS WARRANTIES. ALL INFORMATION CONTAINED HEREIN IS PROVIDED “AS IS” WITHOUT WARRANTY OF ANY KIND.
    [Show full text]
  • The Structure of the Securities Market–Past and Future, 41 Fordham L
    University of California, Hastings College of the Law UC Hastings Scholarship Repository Faculty Scholarship 1972 The trS ucture of the Securities Market–Past and Future William K.S. Wang UC Hastings College of the Law, [email protected] Thomas A. Russo Follow this and additional works at: http://repository.uchastings.edu/faculty_scholarship Part of the Securities Law Commons Recommended Citation William K.S. Wang and Thomas A. Russo, The Structure of the Securities Market–Past and Future, 41 Fordham L. Rev. 1 (1972). Available at: http://repository.uchastings.edu/faculty_scholarship/773 This Article is brought to you for free and open access by UC Hastings Scholarship Repository. It has been accepted for inclusion in Faculty Scholarship by an authorized administrator of UC Hastings Scholarship Repository. For more information, please contact [email protected]. Faculty Publications UC Hastings College of the Law Library Wang William Author: William K.S. Wang Source: Fordham Law Review Citation: 41 Fordham L. Rev. 1 (1972). Title: The Structure of the Securities Market — Past and Future Originally published in FORDHAM LAW REVIEW. This article is reprinted with permission from FORDHAM LAW REVIEW and Fordham University School of Law. THE STRUCTURE OF THE SECURITIES MARIET-PAST AND FUTURE THOMAS A. RUSSO AND WILLIAM K. S. WANG* I. INTRODUCTION ITHE securities industry today faces numerous changes that may dra- matically alter its methods of doing business. The traditional domi- nance of the New York Stock Exchange' has been challenged by new markets and new market systems, and to some extent by the determina- tion of Congress and the SEC to make the securities industry more effi- cient and more responsive to the needs of the general public.
    [Show full text]
  • Sec Formalizes Its Position on Pipe Transactions
    June 2007 SEC FORMALIZES ITS POSITION ON PIPE TRANSACTIONS By Jeffrey T. Hartlin, Elizabeth A. Brower and Michael L. Zuppone Private investment in public equity offerings, labeled primary offering made on behalf of the issuer, in which “PIPEs” by market participants, have become a case the PIPE investors would be viewed as effectively permanent alternative for raising equity capital by public acting as statutory underwriters with respect to the companies in need of financing. Pursuant to informal resale of their shares to the public. guidance issued by the Staff of the Securities and BACKGROUND Exchange Commission (“SEC”) in the mid 1990s, PIPEs have been treated as completed private placements not PIPE transactions have two components. The first subject to integration with subsequent registered component involves the original issuance of the secondary offerings by selling securityholders. Under securities – i.e., the private placement of securities by a this guidance, PIPE investors have been able to have the public company to one or more accredited investors in shares issued in (or the shares underlying convertible reliance on the statutory private placement exemption securities issued in) the PIPE transaction registered for provided by Section 4(2) of the Securities Act and/or public resale into the trading market concurrently with private offering exemption provided by Regulation D or soon after the closing of the PIPE transaction. under the Securities Act. The securities sold in PIPEs Recently, as described below, the treatment of PIPEs may include common stock, straight or convertible investors in registered offerings as just selling preferred stock, convertible debt or a combination of securityholders, as opposed to statutory underwriters, these securities, as well as warrants that are issued to has been called into question in certain circumstances.
    [Show full text]
  • Providing the Regulatory Framework for Fair, Efficient and Dynamic European Securities Markets
    ABOUT CEPS Founded in 1983, the Centre for European Policy Studies is an independent policy research institute dedicated to producing sound policy research leading to constructive solutions to the challenges fac- Competition, ing Europe today. Funding is obtained from membership fees, contributions from official institutions (European Commission, other international and multilateral institutions, and national bodies), foun- dation grants, project research, conferences fees and publication sales. GOALS •To achieve high standards of academic excellence and maintain unqualified independence. Fragmentation •To provide a forum for discussion among all stakeholders in the European policy process. •To build collaborative networks of researchers, policy-makers and business across the whole of Europe. •To disseminate our findings and views through a regular flow of publications and public events. ASSETS AND ACHIEVEMENTS • Complete independence to set its own priorities and freedom from any outside influence. and Transparency • Authoritative research by an international staff with a demonstrated capability to analyse policy ques- tions and anticipate trends well before they become topics of general public discussion. • Formation of seven different research networks, comprising some 140 research institutes from throughout Europe and beyond, to complement and consolidate our research expertise and to great- Providing the Regulatory Framework ly extend our reach in a wide range of areas from agricultural and security policy to climate change, justice and home affairs and economic analysis. • An extensive network of external collaborators, including some 35 senior associates with extensive working experience in EU affairs. for Fair, Efficient and Dynamic PROGRAMME STRUCTURE CEPS is a place where creative and authoritative specialists reflect and comment on the problems and European Securities Markets opportunities facing Europe today.
    [Show full text]
  • How Important Is Liquidity Risk for Sovereign Bond Risk Premia? Evidence from the London Stock Exchange by Ron Alquist
    Working Paper/Document de travail 2008-47 How Important Is Liquidity Risk for Sovereign Bond Risk Premia? Evidence from the London Stock Exchange by Ron Alquist www.bank-banque-canada.ca Bank of Canada Working Paper 2008-47 December 2008 How Important Is Liquidity Risk for Sovereign Bond Risk Premia? Evidence from the London Stock Exchange by Ron Alquist International Economic Analysis Department Bank of Canada Ottawa, Ontario, Canada K1A 0G9 [email protected] Bank of Canada working papers are theoretical or empirical works-in-progress on subjects in economics and finance. The views expressed in this paper are those of the author. No responsibility for them should be attributed to the Bank of Canada. ISSN 1701-9397 © 2008 Bank of Canada Acknowledgements I would like to thank my colleagues in the International Department at the Bank of Canada, seminar participants at the University of Saskatchewan, Laura Beny, Ben Chabot, Lutz Kilian, Linda Tesar, Marc Weidenmier, and Kathy Yuan for their comments. Brian DePratto, Maggie Jim, and Golbahar Kazemian provided first-rate research assistance. ii Abstract This paper uses the framework of arbitrage-pricing theory to study the relationship between liquidity risk and sovereign bond risk premia. The London Stock Exchange in the late 19th century is an ideal laboratory in which to test the proposition that liquidity risk affects the price of sovereign debt. This period was the last time that the debt of a heterogeneous set of countries was traded in a centralized location and that a sufficiently long time series of observable bond prices are available to conduct asset-pricing tests.
    [Show full text]