FCA launches consultation into changing listing rules

The Financial Conduct Authority (FCA) has launched a consultation into new proposals which would see founders able to retain more voting rights after listing on the London Stock Exchange (LSE).

The changes could include the introduction of a dual-class share structure into the premium listing segment of the exchange, used by larger companies subject to more regulatory oversight.

This would bring UK technology listings more in line with those offered by Silicon Valley companies like Facebook, in a move the FCA hopes will help the UK compete with New York, Hong Kong, and Shanghai.

Technology companies raised $55 billion across 257 listings in 2020 according to a report by law firm Baker Mackenzie.

However, the UK’s share of these listings is in decline, according to statistics by New Financial; in 2006 the UK hosted 10 per cent of global initial public offerings (IPOs) – by 2018 this had reduced to only 5 per cent.

The FCA’s move comes in response to the UK Listing Review, chaired by Lord Jonathan Hill and the Kalifa Review of UK FinTech.

The watchdog also proposed reducing the number of shares that must be made available to the public or free-float to 10 per cent from 25 per cent.

The changes are also set to include an increase in the minimum market capitalisation threshold for premium and standard listing segments for shares in ordinary commercial companies from £700,000 to £50 million.

The FCA said that the larger minimum market cap threshold will give investors "greater trust and clarity about the types of company with shares admitted to different markets".

The FCA consultation will run for 10 weeks, with a closing date of September 14 2021.
Subject to consultation feedback and FCA board approval, the FCA said it will seek to announce the new rules before the end of 2021.

Eight of the UK’s tech companies IPO’d on the LSE in 2020, raising a total of £3.1 billion, almost double when compared with 2018’s tech IPOs.

The FCA highlighted the importance of companies being able to raise capital via listing during the pandemic; and said that UK companies admitted to the LSE’s Main Market and AIM raised £14.7 billion in equity between April and June 2020, almost double – 194 per cent - the amount in the same period in the previous year.

The Kalifa Review of UK FinTech highlighted results of a 2019 survey of UK FinTechs, with a third of the 224 FinTech firms surveyed stating they expected to undertake an IPO within the next 5 years.

“Effective public markets are critical in enabling companies to finance their businesses, which in turn creates growth and jobs for the UK economy,” said Clare Cole, director of market oversight at the FCA. “These proposals are essential if we intend for the UK to continue to be a modern and dynamic market. Today, we are acting assertively to meet the needs of an evolving marketplace.”

“Our proposals should result in a wider range of listings in the UK, and increased choice for investors while we continue to ensure appropriate levels of investor protection.”

She added: “They are intended to encourage high quality companies to list earlier, and so increase the possibility of a wider investor base being able to access growth in these companies.”

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