IPO
UK watchdog to simplify listing rules to boost tech IPOs
May 3, 2023
The UK’s financial watchdog has proposed new rules to simplify domestic public listings in a bid to attract more tech and early-stage companies to its exchange.
In a consultation published on Wednesday, the Financial Conduct Authority set out plans to replace the existing premium and standard listing segments with a single category.
Currently, the premium and standard segments have different eligibility requirements that a company must meet in order to list, with the premium requiring a higher level of corporate governance. Only companies included in the latter are eligible to be included in the FTSE index, making it more prestigious than the standard segment.
The regulator, which released a paper detailing possible reforms last year, said the creation of a single category is intended to remove barriers for early-stage companies looking to access the premium segment, this includes the requirement to have a three-year audited track record. The change is also expected to encourage more dual class share structures, which are relatively uncommon in the UK compared with other listing destinations such as the US.
There are also plans to remove mandatory shareholder votes for transactions including acquisitions, which is understood to be one of the main reasons why SoftBank-backed chip maker Arm opted for a US-only IPO.
“Our proposed reforms would significantly rebalance the burden of regulation to the benefit of listed companies and investors who are willing to set their own risk appetite and terms of engagement,” FCA CEO Nikil Rathi said in a statement. “We want to encourage more companies to list and grow in the UK, versus other highly competitive international markets.”
The FCA’s new proposed change has been welcomed by investors as a positive step to increasing the UK’s attractiveness as a listing destination.
“These reforms will provide a boost for the country's important tech sector by allowing companies easier access to public markets in London and encourage ‘local heroes’ to be able to list here rather than overseas,” Dawn Capital general partner Haakon Overli said.
According to the UK Listing Review, the UK accounted for only 5% of global IPOs between 2015 and 2020. VC-backed public listings have also declined with only 13 completed last year in the UK and Ireland, according to PitchBook data—although the global downturn is a major driver of the decrease in the number of listings.
Since 2021, the UK has been putting in place measures to improve the listing regime including lowering free float levels, allowing certain types of dual class share structures and introducing digital financial reporting.
Featured image by Chris J Ratcliffe/Getty Images
In a consultation published on Wednesday, the Financial Conduct Authority set out plans to replace the existing premium and standard listing segments with a single category.
Currently, the premium and standard segments have different eligibility requirements that a company must meet in order to list, with the premium requiring a higher level of corporate governance. Only companies included in the latter are eligible to be included in the FTSE index, making it more prestigious than the standard segment.
The regulator, which released a paper detailing possible reforms last year, said the creation of a single category is intended to remove barriers for early-stage companies looking to access the premium segment, this includes the requirement to have a three-year audited track record. The change is also expected to encourage more dual class share structures, which are relatively uncommon in the UK compared with other listing destinations such as the US.
There are also plans to remove mandatory shareholder votes for transactions including acquisitions, which is understood to be one of the main reasons why SoftBank-backed chip maker Arm opted for a US-only IPO.
“Our proposed reforms would significantly rebalance the burden of regulation to the benefit of listed companies and investors who are willing to set their own risk appetite and terms of engagement,” FCA CEO Nikil Rathi said in a statement. “We want to encourage more companies to list and grow in the UK, versus other highly competitive international markets.”
The FCA’s new proposed change has been welcomed by investors as a positive step to increasing the UK’s attractiveness as a listing destination.
“These reforms will provide a boost for the country's important tech sector by allowing companies easier access to public markets in London and encourage ‘local heroes’ to be able to list here rather than overseas,” Dawn Capital general partner Haakon Overli said.
According to the UK Listing Review, the UK accounted for only 5% of global IPOs between 2015 and 2020. VC-backed public listings have also declined with only 13 completed last year in the UK and Ireland, according to PitchBook data—although the global downturn is a major driver of the decrease in the number of listings.
Since 2021, the UK has been putting in place measures to improve the listing regime including lowering free float levels, allowing certain types of dual class share structures and introducing digital financial reporting.
Featured image by Chris J Ratcliffe/Getty Images
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