The UK’s financial regulator has simplified listing rules in the hope that more tech startups will list in London.
Calling it the “biggest overhaul in three decades,” the Financial Conduct Authority is offering more flexibility around enhanced voting rights and removing the need for votes on significant transactions.
The FCA will also combine the premium and standard listing segments into a new, single category for shares, which will allow all companies to implement dual-class share structures.
The regulator said the new rules, which have been years in the making, are intended to “better align” the UK’s regime with international standards. The change comes at time when fewer companies are listing in London, as others move away.
At the start of the year, UK-listed gaming giant Flutter, which is based in Dublin, said it would move its primary listing from London to New York after floating on the New York Stock Exchange in January. Only months prior, British chip designer Arm picked New York over London for its $54.5 billion IPO.
Navina Rajan, a senior analyst with PitchBook in London, said flexibility on dual-class shares would likely be welcomed by the market.
“This is particularly important for tech and venture-backed firms, where in 2021, around 45% of tech companies listing in the US had dual-class shares structures, and close to 25% of non-tech US IPOs,” Rajan said. “Outside of internal and structural changes, external, cultural attitudes will also have to shift in investor attitude toward tech IPOs and more broadly, a market which has underperformed other world indices and has a limited track record with successful tech listings.”
Under the new rules, shares with enhanced voting rights can only be held by a director and will be subjected to transfer restrictions. Any votes to approve discounted share offers are to be excluded from the rule and will revert to one share, one vote.
Currently, companies on the London Stock Exchange’s standard segment face no restrictions on enhanced voting rights, but companies under the more prestigious premium segment face a five-year sunset clause on dual-class shares and a 20:1 cap on voting ratio.
The British Private Equity & Venture Capital Association’s chief executive, Michael Moore, said he welcomes the changes as part of a wider discussion on how to unlock further capital and address the UK’s “scale-up gap.” He said: “This is an important step forward to making Britain a more flexible and attractive place to do business whilst boosting the accessibility of the UK’s capital markets.”
Featured image courtesy of the FCA
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