Skip to main content

Privatisations: Market Stabilisation Operations

Volume 576: debated on Sunday 18 February 1996

The text on this page has been created from Hansard archive content, it may contain typographical errors.

asked Her Majesty's Government:Whether they are satisfied that share-price support operations or market stabilisation operations following privatisation issues do not create a "false market", and if so, what are the reasons for their view.

The stabilisation arrangements put in place in respect of government share sales are set out in the relevant prospectuses. Any stabilisation transactions have been carried out by the global co-ordinators of the share sales, in accordance with rules laid down by the Securities and Investments Board (SIB), under Section 48 of the Financial Services Act (FSA).

asked Her Majesty's Government:Whether they have any details of share-price support operations or market stabilisation operations following the privatisation (or sale) of companies on the London Stock Exchange as part of the privatisation programme since inception, and, if so, which privatisations were they, and what was the number and cost of shares acquired in each case.

In line with developing market practice, the major government share sales since 1991, BT2, BT3, Genco2, Railtrack and British Energy have included provisions allowing the global co-ordinators to over-allot or effect transactions which stabilise or maintain the market price of the shares concerned. Details of the stabilisation arrangements are contained in the prospectuses issued in connection with these sales. Any stabilisation transactions are conducted by the global co-ordinators for the account of the managers.In the share sales where stabilisation has been present, part of the government shareholding in the company was not sold outright to the managers, but the managers were instead granted an option to acquire that part of the shares from the Government. The managers could, if they had purchased shares in the market stabilisation operation, use the stabilisation shares to satisfy their commitments to customers rather than buying the shares under option from the Government.The global co-ordinators announced that they had purchased all the relevant option shares from the Government in the case of BT3 (91.5 million shares) and Railtrack (65.2 million shares). In the other sales, the numbers of option shares purchased from the Government by the global co-ordinators were:BT2: 22.5 millionGenco2: 9.2 million National Power and6.1 million PowerGenBritish Energy: 80.9 millionIt is not market practice to publish the extent of over-allotment or the number and price of shares purchased in stabilisation operations.