Listed firms need public flogging
The £18.5 trillion in assets managed by members of the Investor Forum would cover a fair few shopping trips to Poundland, and buy its parent’s shares hundreds of times over — but will public market shareholders get the chance?
That’s one of the questions indirectly prompted by the forum’s latest annual review, which highlights the intensifying erosion of equity markets amid the allure of vast pools of global private capital.
In Poundland’s case, its owner,
Steinhoff, will decide in the coming months whether to pursue a flotation in London and Warsaw, or sell to capital-rich private equity firms.
It’s the same dual-track process that has been a fixture for M&A advisers for years — but the trend has increasingly diverged towards private sales.
That deprives public investors of attractive investment opportunities and, coupled with the volume of listed
companies being taken private, has
reduced the overall stock of quoted
UK equities.
The Investor Forum is right to call this out — and its language is stark: “There is no doubt,” its report says, “that the effectiveness of public markets is being questioned.”
“Alongside the opportunity for citizens to share in the benefits of successful companies through savings products, there is no doubt that the scrutiny which public markets bring to bear can play an important role in increasing societal confidence in business.”
Among the factors cited by chief executive Andy Griffiths is Mifid-II’s impact on the availability of research on the majority of public companies, which has caused a vacuum in the information flow on which investors base their decision-making.
Increasingly, PLC directors complain about the regulatory and bureaucratic burdens that public disclosure rules place upon them.
Compare that to the relative tranquility of private markets, and the frequency with which FTSE 100 chairs and chief executives now bemoan their lot starts to make sense.
A ‘short-haul’ flight?
How ironic. For most politicians, the phrase long-term is elasticated to suit personal or party interests — but rarely beyond a current electoral cycle.
In recent weeks, however, short-term has become an even more malleable concept.
Take Sajid Javid, whose description of Flybe’s difficulties as temporary, stretches credibility as well as time.
The government is now tying itself in knots as it seeks to avoid the collapse of companies it deems politically important while adhering to traditional Conservative free market economics.
British Steel and Flybe offer the two most obvious examples. The former has now been on life support for nine months, costing taxpayers hundreds of millions of pounds.
Despite positive intent on both sides, a rescue by China’s Jingye Group looks far from assured.
At the Exeter-based airline, the cost to the public purse is substantially lower, but the merits of any form of bailout are more questionable.
Like him or loathe him, Ryanair boss Michael O’Leary makes a perfectly valid point when he asks the chancellor why the government should step in with emergency funding if its shareholders or private lenders are unwilling to.
A state loan on commercial terms looks unworkable if Flybe’s assets have already been pledged to other stakeholders or are leased (as is typical in the aviation sector).
And providing that risk capital
without sharing in the upside that Connect Airways’ business plan
suggests would arrive in the third year of its turnaround plan is an unappealing prospect.
Given the alacrity with which Grant Shapps, the transport secretary, has
nationalised failing train operating companies, perhaps the moment has come to do the same at Flybe: pilot of last resort, anyone?
10X reunion beckons
It doesn’t take a genius to imagine the deafening silence that greeted news of John McFarlane’s appointment as chairman of Australian bank Westpac at 10X Future Technologies.
McFarlane’s ousting of Antony Jenkins as Barclays chief executive more than four years ago was arguably the most brutal defenestration of a British bank boss since the financial crisis (although Stephen Hester and John Flint might disagree).
Jenkins has successfully rebooted
his career, setting up 10X and
joining an international cluster of
corporate boards.
Only two months ago, though, his banking-as-a-service startup took on Westpac as a client.
I wonder if the deal has an escape clause — if not, some frosty meetings lie ahead.
Mark Kleinman is City editor at Sky News @MarkKleinmanSky