Glencore`s IPO in 2011 is often heralded as the arrival of key investments in initial public offerings (IPOs) in Europe. At the time, commentators were willing to suggest that cornerstone investments – for which one or more investors agree to acquire a certain number or value of shares before going public – could become a new norm in European markets, reflecting practice in Asia. This may affect the liquidity of equities and, despite the potential benefit of a quality investor guaranteeing the investment, be unattractive to other potential investors. Concerns about liquidity can be reinforced if an investor of the cornerstone agrees to a blockage. The impact of the COVID-19 pandemic, both on capital markets and on the economy in general, may well lead to greater importance for the success of IPOs. One of the disadvantages of any Cornerstone investment is that it puts a considerable number of shares in the hands of an investor and does not give any breadth to the shareholder register. On the effective date or as soon as possible, spinco enters into an agreement with investors regarding Spinco shares and spinco Warrants, which contain the same conditions as in point 6.4 of Cornerstone`s investment agreement, but which replace the references to (A) “the company” by Spinco, (B) “New ordinary shares of GGP” by spinco ordinary shares, (C) “Shares” with Spinco Shares and (D) “Warrants” or “New Warrants” with Spinco-Warrants. With a marked improvement in European IPO activities after 2013, Cornerstone`s investments did not grow as some had predicted. This is perhaps surprising, as the cornerstone model was developed in Asia to cater to a bull market where investors were frustrated at not being able to participate in IPOs. In those circumstances, participation as a keystone investor guaranteed a full allocation of an order in a well-sustained IPO.
The market practice in the UK was for cornerstone investors to participate in an IPO at the same price as other investors, but this is not a prerequisite. The approach is driven by the fear that the offer of a discount could weigh on IPO prices, given that other investors would be reluctant to accept a higher valuation. If a haircut were to be proposed, one would expect the investor`s cornerstone to agree to a longer freeze on his shares in order to prevent him from being able to reduce the share price immediately after admission. With regard to the four key investments mentioned above in 2019, it was only the only strategic investor, Mastercard, which, as a keystone investor, participated in the IPO of Network International, subject to a freeze of its shares, while the institutional investors who participated in the IPOs, Traton and Marel, could freely trade from the admission of shares to the market….