Emerging practice

Author: | Published: 1 Jul 2009

With the globalisation of the equity markets, US institutional investors have become increasingly important shareholders in European companies. For many FTSE 250 companies, US institutional investors hold more than 10% of the shares. So European companies often need to consider carefully if and how their US shareholders can participate in rights offerings. Separately, companies and the underwriters need to consider if they wish to market the so-called rump (shares not taken up by shareholders in the rights offering) to new US investors.

Historically, European rights offerings often excluded US shareholders. Especially for larger European companies, however, this is simply no longer viable. US shareholders may be critical to the success of the transaction, and in this market underwriters want the flexibility to distribute the rump as widely as possible. US institutional shareholders have also become more vocal in expecting to participate in the possible economic benefits of a rights offering....