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Commercial Awareness Update - February 2020
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<blockquote data-quote="HH" data-source="post: 23175" data-attributes="member: 1642"><p style="text-align: center"><strong>Calisen’s IPO on the London Stock Exchange</strong></p><p>By [USER=3442]@Rachel S[/USER] (Rachel Strickland)</p><p></p><p><u>The Story</u></p><p></p><p>Smart meter company Calisen has successfully floated on the London Stock Exchange (‘LSE’) with a £1.3 billion valuation marking the biggest European Initial Public Offering (‘IPO’) of the year, and the first IPO of a British company on the LSE since Trainline last June. The IPO raises fresh stimulus for European equity capital markets which reached their lowest level in seven years in 2019 in part of a sustained period of low interest rates and cheap debt continuing to be seen as a favourable way to raise finance. The LSE in particular has seen previous poor IPO performances from Aston Martin Lagonda and fintech company, Funding Circle.</p><p></p><p></p><p>The choice of a UK listing has been seen as a favourable sign of post-Brexit investor sentiment.</p><p></p><p>The LSE is set to file its $27 billion deal to buy Refinitiv with the European Commission which if successful, would triple the LSE’s revenues to £7 billion, increase data and trading capacity and shows the development of the stock exchange. Alongside this, the development of the Shanghai-London Stock Connect to facilitate trading of Shanghai listed companies on the LSE and vice versa arguably shows the global potential of UK listings.</p><p></p><p></p><p></p><p><u>Impact on businesses and law firms</u></p><p></p><p>The capital structure of each business will be carefully considered in any potential IPO decision and considering recent speculation over a further interest rate cut, debt finance may get even cheaper and lure investors over the prospect of equity funding through IPOs on the LSE. With that said, it will be interesting to monitor anticipated IPOs from the likes of Interswitch and cinema chain Vue.</p><p></p><p></p><p>Simpson Thatcher & Bartlett led this IPO due to a longstanding client relationship with private equity firm KKR who are exiting their investment in Calisen. Equity capital markets are a key focus for many city firms and lawyers will draft prospectuses, advise on disclosure regimes and register companies wanting to list on the LSE. Lawyers will also provide counsel to the underwriters. In 2019, DWF became the largest law firm to list on the LSE and in the face of increasing downward pressure on fees and the rise of legal technology investment; listing on the LSE could also serve another viable method for law firms to raise finance.</p><p></p><p></p><p style="text-align: center"><strong>Coronavirus: An Act of God?</strong></p><p>By [USER=3115]@Ayah[/USER] (Ayah Reza)</p><p></p><p><u>The Story</u></p><p></p><p>As the coronavirus continues to spread across Mainland China, businesses are struggling to reopen despite the end of the extended New Year holiday.</p><p></p><p></p><p>The China Council for the Promotion of International Trade (CCPIT) has been issuing “force majeure” certificates to almost 100 Chinese companies that wish to avoid incurring penalties for breaching their contractual obligations because of the coronavirus outbreak.</p><p></p><p></p><p>The drastic reduction in demand for raw materials and reliance on “force majeure” clauses has shaken the global commodities market. Several Chinese companies have invoked force majeure clauses to cancel copper imports from suppliers in countries like Somalia. China’s largest importer of liquefied natural gas (LNG), CNOOC, declared force majeure over its delivery of shipments. However, this was swiftly rejected by Shell and Total. As OPEC mulls over further output cuts, the price of oil has dropped to its lowest since January 2019. </p><p></p><p></p><p><u>Impact on Businesses and Law Firms</u></p><p></p><p>Lawyers will find themselves at the centre of contractual disputes arising from the coronavirus outbreak. Whether force majeure can be invoked for the coronavirus will depend entirely on the wording of the contract in question. Many contracts of this nature stipulate to resolve such disputes through arbitration. A seat of arbitration in Mainland China is less than ideal for most foreign companies. Therefore, it is likely such disputes will be handled through negotiation, rather than arbitration or litigation.</p><p></p><p></p><p>The CCPIT issued certificates do not exempt a company from its contractual obligations, but merely serve as persuasive evidence to use during negotiations. Whilst the reliance on force majeure clauses may fall within a legal technicality, it has the potential to damage business reputation and working relationships in the future.</p></blockquote><p></p>
[QUOTE="HH, post: 23175, member: 1642"] [CENTER][B]Calisen’s IPO on the London Stock Exchange[/B][/CENTER] By [USER=3442]@Rachel S[/USER] (Rachel Strickland) [U]The Story[/U] Smart meter company Calisen has successfully floated on the London Stock Exchange (‘LSE’) with a £1.3 billion valuation marking the biggest European Initial Public Offering (‘IPO’) of the year, and the first IPO of a British company on the LSE since Trainline last June. The IPO raises fresh stimulus for European equity capital markets which reached their lowest level in seven years in 2019 in part of a sustained period of low interest rates and cheap debt continuing to be seen as a favourable way to raise finance. The LSE in particular has seen previous poor IPO performances from Aston Martin Lagonda and fintech company, Funding Circle. The choice of a UK listing has been seen as a favourable sign of post-Brexit investor sentiment. The LSE is set to file its $27 billion deal to buy Refinitiv with the European Commission which if successful, would triple the LSE’s revenues to £7 billion, increase data and trading capacity and shows the development of the stock exchange. Alongside this, the development of the Shanghai-London Stock Connect to facilitate trading of Shanghai listed companies on the LSE and vice versa arguably shows the global potential of UK listings. [U]Impact on businesses and law firms[/U] The capital structure of each business will be carefully considered in any potential IPO decision and considering recent speculation over a further interest rate cut, debt finance may get even cheaper and lure investors over the prospect of equity funding through IPOs on the LSE. With that said, it will be interesting to monitor anticipated IPOs from the likes of Interswitch and cinema chain Vue. Simpson Thatcher & Bartlett led this IPO due to a longstanding client relationship with private equity firm KKR who are exiting their investment in Calisen. Equity capital markets are a key focus for many city firms and lawyers will draft prospectuses, advise on disclosure regimes and register companies wanting to list on the LSE. Lawyers will also provide counsel to the underwriters. In 2019, DWF became the largest law firm to list on the LSE and in the face of increasing downward pressure on fees and the rise of legal technology investment; listing on the LSE could also serve another viable method for law firms to raise finance. [CENTER][B]Coronavirus: An Act of God?[/B][/CENTER] By [USER=3115]@Ayah[/USER] (Ayah Reza) [U]The Story[/U] As the coronavirus continues to spread across Mainland China, businesses are struggling to reopen despite the end of the extended New Year holiday. The China Council for the Promotion of International Trade (CCPIT) has been issuing “force majeure” certificates to almost 100 Chinese companies that wish to avoid incurring penalties for breaching their contractual obligations because of the coronavirus outbreak. The drastic reduction in demand for raw materials and reliance on “force majeure” clauses has shaken the global commodities market. Several Chinese companies have invoked force majeure clauses to cancel copper imports from suppliers in countries like Somalia. China’s largest importer of liquefied natural gas (LNG), CNOOC, declared force majeure over its delivery of shipments. However, this was swiftly rejected by Shell and Total. As OPEC mulls over further output cuts, the price of oil has dropped to its lowest since January 2019. [U]Impact on Businesses and Law Firms[/U] Lawyers will find themselves at the centre of contractual disputes arising from the coronavirus outbreak. Whether force majeure can be invoked for the coronavirus will depend entirely on the wording of the contract in question. Many contracts of this nature stipulate to resolve such disputes through arbitration. A seat of arbitration in Mainland China is less than ideal for most foreign companies. Therefore, it is likely such disputes will be handled through negotiation, rather than arbitration or litigation. The CCPIT issued certificates do not exempt a company from its contractual obligations, but merely serve as persuasive evidence to use during negotiations. Whilst the reliance on force majeure clauses may fall within a legal technicality, it has the potential to damage business reputation and working relationships in the future. [/QUOTE]
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Commercial Awareness Update - February 2020
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