A draft rulebook from the London Stock Exchange (LSE) has given details on how the High Growth Segment of the UK capital markets will operate.
LSE says that the new High Growth Exchange has been developed to meet the needs of fast-growing companies aspiring to be included in the Premium segment of the UKLA’s Official List.
Under the new rules, companies will be eligible for admission to it if they meet criteria including: historic revenue compound annual growth rate of 20 per cent or more over a three year period and are a European Economic Area incorporated, and active, commercial company.
Furthermore, firms will have to publish an approved prospectus and there will be a minimum free float of 10 per cent.
It is hoped the new mechanism will provide greater choice for companies seeking capital and investors seeking growth opportunities.
Back in September, the coalition government joined forces with the LSE, as well as entrepreneurs and investors, to kick-start an effort to make the on-ramp to a capital market listing easier for fast-growing technology businesses.
As one of the figureheads behind the push, Robin Klein, venture partner at Index Ventures, told GrowthBusiness in October that the situation had arisen because a number of companies are growing up and becoming of the size where they need to decide a next step. Klein added that the LSE was not providing a potential outlet for them.
He commented, ‘What is happening is that they are either considering or completing a listing in New York or on NASDAQ, or they have just sold out.’
Alexander Justham, CEO of LSE, comments, ‘Ensuring that the UK’s fastest growing and most dynamic companies have access to equity is a priority for London Stock Exchange.
‘The High Growth Segment will provide an additional attractive choice, giving these companies a launch pad for further success.’
To join the High Growth Segment, companies will be required to clearly set out intentions to progress to the Official List over time as eligibility occurs.
The LSE is now inviting responses to the rulebook on its website and interested parties have until 8 March to log comments.
Linda Main, partner at accountancy firm KPMG, says, ‘This is a positive step by the LSE which helps address the concerns of high growth companies.
‘The reduction in the free float requirement to 10 per cent will really help London attract more tech IPOs whose owners have been deterred by the existing requirement to give up 25 per cent of their equity.’