In place of a smoothly managed procedure focused on connected research, there is the potential for more open examination of the prospectus and more dissenting views from independent analysts. And the run-up to the new rules is likely to see increased scrutiny of any companies that may be seen to be listing ahead of heightened disclosure requirements.
While they may pose challenges, the changes do also have potential upside for companies looking to list. If investors are convinced that they have access to more impartial information they may feel more confident in their investment, leading to better valuations and a stronger initial performance.
Additionally, it is possible that in some instances, more transparency could help to ease relations with financial media. While there are clearly benefits in being able to manage the flow of information, journalists are always likely to take the cynics’ perspective and look for the hidden weaknesses they believe haven’t been put in the public domain.
In many cases, it could be argued that it is easier to discuss issues published in a public document than to respond to accusations from the Sunday papers relating to documents you may not have seen or have prepared responses for. This, however, would depend on companies having more leeway to engage with media, analysts and investors than the current restrictive publicity guidelines would allow.
Regardless of how the proposals are finalised, companies looking to pursue an IPO in the coming years need to be aware that the communications process is set to become more complicated.