IPO to be conducted in new format: Bank of Russia proposals
The Bank of Russia proposes to enhance transparency of public offerings: change the content of information disclosed by issuers, adapt it to the needs of retail investors, and improve the quality of IPOs. The assessment of the current practices of offerings and the regulator’s proposals to change them are given in the consultation paper.
The Russian equity market is restoring its potential thanks to internal resources. The role of retail investors has become more important. In order to ensure long-term investments, it is necessary to strengthen the trusted environment and transparency of issuers’ information both during the period of companies’ entry into the capital market and afterwards.
The Bank of Russia deems it necessary to update the requirements for the content of documents important to investors. First, this concerns a securities prospectus. It should include issuers’ forecast indicators, which will enable investors to make balanced investment decisions. Nevertheless, the prospectus summary should be brief and clear, containing key information about the issuer: financial indicators in comparison with previous periods, an investment strategy description, and an assessment of further development.
Companies should also disclose information sensitive to investors about the planned and actual allotment of shares among buyers. In addition, investors should understand the terms of the protective measures taken. Before a public offering, it is required to disclose information on existing restrictions on the sale of securities by the issuer and current shareholders, as well as on the mechanisms used to stabilise the price of shares to decrease their volatility after the IPO.
Also, the Bank of Russia proposes to discuss the possibility of regulating and standardising services rendered by offering organisers. The participation of professionals should increase the quality of IPOs.
According to the regulator, the implementation of these initiatives will help improve the protection of investors’ interests, increase their trust in the Russian securities market, and expand the practice of conducting IPOs as a tool for fund-raising.