Listings only need the power of three, say insurers

The Association of British Insurers wants the number of banks allowed to work on a company flotation to be capped at three.

by Emma Haslett
Last Updated: 11 Jul 2013
The Association of British Insurers wants the government to put a cap on the number of banks allowed to market shares of companies planning to float on the stock market.

The ABI reckons reducing the number of banks marketing shares would make them behave more responsibly and ‘ensure the deals are a success’.

It’s easy to see why companies hire as many banks as they can when they’re preparing to float: banks advising on a business’ flotation are unlikely to provide negative outlooks on the offering – so the more banks you can have working on the deal, the more positive it will sound. Which is, presumably, why mining company Glencore hired five to work on its listing last year.

Banks also clamour to work on a big listing: as one City fund manager told told The Times, ‘banks fight like cats in a sack to get on to the big deals so they can ensure their place in the end-of-year league tables’.

Indeed, some company execs even go as far as to reward banks that have done free work for them with a chance to work on the listing.

But Robert Hingley, director of investment at the ABI, says the practice has to stop.

‘Investors want to see a flow of high-quality, well-prepared and well-run companies coming to the market,’ he says.

Whether or not the government will be keen on the idea remains to be seen. It has, after all, hired a whopping seven banks to work on the privatisation of the Royal Mail…

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