Capital markets and Covid-19: outlook for 2021

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A report on a session presented by the IBA Corporate and M&A Law Committee and the IBA Securities Law Committee at the IBA Annual Conference 2020.

Wednesday, 4 November 2020

Session Co-Chairs:

Paul Rodel  Debevoise & Plimpton, New York

Tom Fagernäs  Krogerus, Helsinki


Vivan Lam  Paul Hastings, Hong Kong

Francisco (Chico) Müssnich  Barbosa Müssnich & Aragao, São Paulo/Rio de Janeiro

Ryan Wessels  Bowmans, Johannesburg

Session rapporteur:

Tom Fagernäs  Krogerus, Helsinki



The financial markets in 2020 underwent unprecedented turmoil with the outbreak of the Covid-19 pandemic worldwide. In March, stock markets globally recorded record drops in a matter of days and weeks, inflicting distress on many public issuers and market participants. This, in turn, also caused governments and regulatory agencies to quickly put together relief measures designed to alleviate the immediate crisis that was about to unfold.

This session summarised those relief measures based on a multi-jurisdictional survey compiled by the IBA Securities Law Committee, who discussed which measures could become more permanent going forward and who also drew some conclusions on future developments applicable to any crisis. The rest of the session focused on prevailing trends on the international capital markets and the outlook for 2021.

Covid-19 relief measures

Paul Rodel presented the multi-jurisdictional survey on relief measures designed for public issuers following the outbreak of the Covid-19 virus. Depending on jurisdiction, these measures may have included relaxations on financial reporting, suspensions of proceedings, short selling restrictions, postponements of shareholders meetings and the approval of annual accounts and virtual shareholder meetings.

The panel agreed that, since March, many relief measures have become either obsolete or lost their novelty, becoming more or less ‘business as usual’. For instance, in Hong Kong, things were seen to have returned almost back to normal from a securities regulatory perspective. The panel suggested that certain aspects related to the various relief measures are now here to stay, such as virtual shareholder meetings and virtual roadshows, while otherwise, issuers and market participants are perhaps better equipped to face the next stages of the pandemic.

Outlook for 2021

The panel then moved on to discuss trends beyond the Covid-19 pandemic and the outlook for 2021. The panel seemed to agree that financial market activity had resumed to pre-pandemic levels, if not even exceeded them. Tom Fagernäs began by mentioning that in Finland and the Nordics, for example, the initial public offering (IPO) market is currently very active, following which he presented a few alternative ways of going public, namely direct listings and special purpose acquisition vehicles (SPACs). These alternatives were then discussed by the panel.

Direct listings are a way for issuers to go public without an offering. This avenue would typically be available for issuers with a broad, pre-existing shareholder base and no need to create sufficient free float in order to meet listing requirements. Although a direct listing would not raise any proceeds for the issuer, its benefits include better liquidity for shareholders wishing to trade in the company's stock, increased publicity for the issuer, public issuer status and enhanced price formation through transparency and reporting. There are examples of direct listings in recent years, a notable example being Spotify on the New York Stock Exchange.

Ryan Wessels then delved into the concept of SPACs, which in recent times have been on the rise in the United States, but with pockets of SPAC activity also taking place elsewhere. SPACs are companies that pool funds from a variety of investors and sponsors, including through an IPO. The funds and proceeds are then placed into a trust account, and the SPAC looks for an acquisition target to purchase with those funds and proceeds. This provides the acquisition target with an alternative way of going public, indirectly through the SPAC, and the shareholders of the acquisition target with an exit. The panel concluded that the SPAC is particularly attractive for investors who look for alternative asset classes but who cannot invest directly into them other than indirectly through listed stock.

Looking forward to 2021, the panellists forecast that it will be a year of high activity. Several stock exchanges are re-evaluating their rules on direct listings, dual listings and SPACs, and SPAC activity also seems to be increasing heavily in China, Hong Kong and elsewhere in Asia. Chico Müssnich also explained that many Brazilian corporations, for instance, continue to look for further liquidity through dual listings in Brazil and abroad. It was therefore thankfully concluded that the panellists and their colleagues in law firms globally will most likely be in the position to practice their professions for the foreseeable future.

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