The Securities and Exchange Commission in New York has imposed draconian restrictions, which ban London underwriters and their syndicate of 12 stockbrokers from dealing in Zeneca shares in the five days before the rights issue closes on 21 June.
The SEC rules - which apply because Zeneca will also be listed in New York - mean that two-thirds of market-makers in London could be prevented from actively trading the shares.
Sir Denys Henderson, chairman of Imperial Chemical Industries, opted for a traditional British rights issue rather than the American-style international share offer urged by some advisers, after pressure from his UK institutional shareholders. Some advisers believe it would have been safer to have used the American method of fund raising.
The SEC has imposed the restrictions in an effort to prevent manipulation of the share price. It is common practice in Britain for connected brokers to support a share price ahead of a rights issue if it looks like running into difficulty. Brokers fear that without support from the syndicate, the price of Zeneca shares could fall below the rights issue level, leaving underwriters with the bulk of the shares.
The grey market price in Zeneca, the bioscience company being demerged from ICI, fell from 680p three weeks ago to close on Friday at 630p - just 5 per cent above the rights issue price of 600p. Any further fall and the rights issue could be in danger. SEC rules prevent syndicate brokers from intervening unless the shares fall below the issue price.
'I know that the underwriters are spooked by the weakness, and it will not help if they cannot puff up the price a little,' said a broker. 'This one's going to be an interesting roller-coaster.'
Market sources said that with the underwriters unable to do anything to hold up the price, dealers will find it easier to go short to depress the stock.
The closer the share price falls to the 600p rights price, the more likely it is that investors will shun the issue. 'The underwriters would just have to sit there and watch, unable to help,' said a broker who is not part of the syndicate.
The underwriters are SG Warburg, the global co-ordinator, BZW and Goldman Sachs.
The syndicate includes Hoare Govett, Morgan Stanley, County NatWest, Merrill Lynch, Deutsche Bank and Lehman Brothers.
Zeneca will be listed on Tuesday, and the rights issue will be launched at the same time. The SEC originally demanded trading restrictions throughout the offer period, fearful that underwriters would attempt to manipulate the price.
SG Warburg complained that this would make it impossible to make a market in Zeneca, and the SEC agreed to limit its restrictions to the last five days - the key period when institutions are deciding whether to subscribe to the offer. If the share price is between 600p and 666p during those days, the restrictions are enforced.
Analysts are already worried about a 16 per cent fall in the pharmaceuticals sector this year, and America's healthcare reforms could cause further turmoil. 'I cannot see Zeneca going beyond 666p, and if it goes below the rights price, that is serious,' said one.
Institutions, which have done little trading in the grey market, are also thought to have gone cool on Zeneca.
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