UK: equity underwriting and associated services - OFT study published

The Office for Fair Trading has published its equity underwriting and associated services study: see here (pdf). The OFT states that it does not have significant concerns regarding the number of available providers of equity underwriting services but notes that there has been a significant increase in fees since the onset of the financial crisis but that fees and discounts have been slow to fall in line with subsequent reductions in risk. The report notes that there is little competitive tension between investment banks during the equity raising process and that companies raising equity capital are not focused principally on reducing underwriting fees. In this regard, the OFT provides several options that companies and institutional shareholders could consider for applying greater pressure on underwriting fees and discounts.

UK: OFT confirms scope of equity underwriting study

The Office of Fair Trading has published a statement in which it provides further information about its study into equity underwriting: see here (pdf).

The OFT will be examining the way that the underwriting market works and will assess whether there is potential for improving the way it functions. This will involve considering how underwriting services are purchased and provided and the affects of regulation in this regard.

The study will focus specifically on equity underwriting services for the different types of share issue used by listed companies to raise capital in the UK, including rights issues, placings and other types of follow-on offer. The study will be limited to equity issues carried out by FTSE 350 listed firms and will not examine Initial Public Offerings.

Further information is available here.

UK: OFT market study on equity underwriting

The Office of Fair Trading is seeking views on the scope of a forthcoming market study into equity underwriting and associated services. In a press release published yesterday - see here - the OFT stated:

In 2009, companies raised an estimated £70 billion of equity capital in the UK, paying an estimated £2 billion in fees for equity underwriting and associated services. Initial discussions have confirmed that there is some dissatisfaction with these services among corporate users of the market.

The OFT proposes that the market study, which will commence this summer, should take a focused look at rights issues and other types of equity-raising by the 350 largest UK public companies, to consider whether users' concerns are justified. It intends to assess:

• How underwriting and related services are provided, including the level of competition for the work and how these different services such as advice, arranging the issue and the actual underwriting are sold.
• How underwriting services are purchased, including the information available to buyers and the incentives on them.
• How the regulatory environment affects the provision of these services.

Further information is available here.