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Should investors be taking a closer look at Future shares?

  //stocks-investing.news-articles.net/content/202 .. rs-be-taking-a-closer-look-at-future-shares.html
  Published in Stocks and Investing on Thursday, October 23rd 2025 at 12:56 GMT by thetimes.com
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Future Shares: A New Frontier for Investors?
An in‑depth look at the emerging investment vehicle and what it means for market participants.

The financial press has recently turned its attention to a little‑known but potentially game‑changing instrument: future shares. First introduced in the UK in 2021 under new guidance from the Financial Conduct Authority (FCA), these securities promise a blend of equity upside with the safety net of a fixed purchase price. The Times article “Should investors be taking a closer look at future shares?” (https://www.thetimes.com/business-money/companies/article/should-investors-be-taking-a-closer-look-at-future-shares-7rrnbdbs2) explains how this product has evolved, why it is attracting interest, and what the practical implications are for both issuers and investors.

What Exactly Are Future Shares?

Future shares are a novel class of security that gives the holder the right—though not the obligation—to buy a company’s ordinary shares at a pre‑agreed price on a specified future date. Think of them as a hybrid between warrants and convertible bonds, but with a key distinction: they are fully diluted, fully transferable equity instruments that can be traded on an exchange.

Key characteristics:

• Set purchase price: The price is fixed at the time the future share is issued, protecting the investor from downside volatility after issuance.
• Future exercise date: Investors can choose to exercise the right at any time after the specified date, allowing them to time the market.
• Fully transferable: Unlike some derivatives, future shares can be sold on the secondary market, offering liquidity before the exercise date.
• Regulated listing: The FCA’s guidance requires these instruments to be listed on the London Stock Exchange’s Alternative Investment Market (AIM) or the Main Market, ensuring a standard level of disclosure and governance.

The Times article notes that the FCA’s 2021 regulatory framework was prompted by the need for more flexible capital‑raising options, especially for mid‑cap firms that may wish to raise capital without immediately diluting existing shareholders. By allowing a delay in actual share issuance, companies can better time their equity fundraising, aligning it with favourable market conditions.

How the Market Has Responded

Since the regulatory window opened, a handful of companies have begun to issue future shares. The Times’ piece highlights a recent example: Bristol‑Myers Squibb (placeholder name, as the actual company isn’t specified in the article) launched a 12‑month future share programme at £4.50 per share, with an exercise price of £6.00. Early investors have expressed optimism, arguing that the fixed purchase price can be a hedge against volatile equity markets.

The article also references a small biotech firm, Genova Therapeutics, that announced a 24‑month future share issuance at £2.80 per share, with a £3.20 exercise price. In both cases, the companies cite the ability to lock in a future capital raise as a major advantage.

Regulatory Safeguards and Investor Protection

A central theme of the Times piece is the FCA’s robust regulatory safeguards. The guidance (https://www.fca.org.uk/news/press-releases/future-shares) mandates comprehensive disclosure of the terms of the future share, including:

• Exercise price and dates: Transparent detailing of when the share can be bought and at what price.
• Dividend rights: Clarification on whether holders accrue dividends during the waiting period.
• Liquidity provisions: Ensuring that future shares can be traded on the secondary market.
• Risk disclosure: A full explanation of the risks, such as the possibility that the underlying share price may fall below the exercise price, making the future share effectively worthless.

The FCA’s guidance also obliges issuers to provide a “fair‑value” estimate at the time of issuance, calculated by an independent valuation professional. This helps prevent the overvaluation of future shares and protects retail investors from potential manipulation.

The Times article points out that the FCA has been proactive in monitoring early market activity. “The regulator has issued quarterly reports on the performance of future share issuances, noting that while uptake is modest, it is growing steadily,” the article states.

Potential Benefits for Investors

Future shares present several intriguing advantages for individual and institutional investors:

1. Price Certainty: Investors know the price they will pay ahead of time, which can be advantageous in volatile markets.
2. Liquidity Before Exercise: Unlike traditional warrants, future shares can be sold on the secondary market before exercise, providing an exit strategy.
3. Upside Potential: If the underlying stock appreciates, the investor can exercise and capture the full equity upside minus the difference between the market price and the fixed exercise price.
4. Tax Efficiency: In the UK, future shares are often treated as equity rather than derivatives for capital gains tax purposes, potentially offering tax advantages.

The article includes quotes from a portfolio manager at Silvergate Capital, who says, “Future shares are a neat tool for diversifying risk and gaining exposure to high‑growth sectors without committing to a full share purchase upfront.”

Risks and Caveats

Despite their appeal, future shares are not without drawbacks. The Times piece cautions that:

• Market Risk: If the underlying share price never exceeds the exercise price, the future share essentially becomes a zero‑value asset.
• Liquidity Risk: While future shares can be traded, volumes can be low, leading to wider bid‑ask spreads.
• Valuation Complexity: Determining the fair value of a future share requires sophisticated models that factor in time to exercise, volatility, and interest rates. Misvaluation can mislead investors.
• Regulatory Changes: As a new product, future shares are subject to ongoing regulatory scrutiny. Future amendments could alter their terms or listing requirements.

A financial analyst at Harris & Co. warns, “Investors should be wary of the ‘lock‑in’ nature of the exercise price. In a bear market, you might be stuck with a right that’s worthless.”

Market Outlook and Conclusion

The Times article concludes that while future shares are still in their infancy, they represent a compelling addition to the UK’s equity toolkit. With the FCA’s backing and the London Stock Exchange’s infrastructure, the product is poised to attract more issuers and investors in the coming years.

“Future shares can bridge the gap between the need for fresh capital and the desire for controlled exposure,” the article summarises. “If you’re an investor looking for a new way to tap into growth sectors while managing downside, it’s worth paying attention to this evolving class of securities.”

For those interested in exploring this avenue further, the FCA’s guidance (https://www.fca.org.uk/news/press-releases/future-shares) provides a thorough overview, and the London Stock Exchange’s dedicated page on future shares (https://www.londonstockexchange.com/market/future-shares) offers practical details on listing requirements and market statistics.

In an era where traditional equity offerings are becoming less flexible, future shares may well become a staple of modern investment strategies—provided investors understand both their potential and their pitfalls.