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Chris Hughes

Equity-Raising Bankers Are on the Naughty Step

U.K. companies and their bankers may be abusing new freedoms to raise emergency funding — and hurting some shareholders in the process.

Investors are watching.

Investors are watching.

Photographer: Richard Baker/In Pictures

A liberalized regime for raising cash from shareholders during the Covid-19 crisis gave U.K. firms and their bankers an inch. Some appear to have taken a mile. Companies should remember their new freedoms come at the expense of fairness and are not meant to be the new normal.

A host of British firms have lately sold off sizable stakes in themselves in rapid-fire deals. Mammoth share sales normally have to be offered to all existing shareholders before anyone else, to protect them from being diluted. But that process takes weeks, and some crisis-hit companies need cash right now. So the guidelines were relaxed last month to allow the quick sale of up to 20% of a firm to whomever will buy it — ideally to current owners, but not necessarily.