London Stock Exchange Pitches New market at High-growth SMEs
The London Stock Exchange (LSE) said that it will launch a niche market, known as the ‘High Growth Segment’, to attract medium-sized companies valued at between £300m and £600m which have a track record of fast growth in recent years.
The new market will aim to be a stepping stone between a listing on the main London market and the Alternative Investment Market (AIM), which was formed in 1995 to enable smaller companies to float shares and is subject to a more flexible regulatory system.
The LSE added that the ‘High Growth Segment’ would not be open to companies incorporated outside the European Union (EU) and the UK and would also exclude mineral and resource companies at exploration stage in order to trigger investor protections under EU law. Applicants must demonstrate annual revenue growth of at least 20% for a minimum of three years, and also indicate that ultimately they plan to join the main market and acquire a premium listing.
The new market will also permit entrepreneurs to raise cash while keeping up to 90% of their firm’s shares. The LSE’s rules normally require companies to make at least 25% of the shares available as a free float on the main market.
The launch of the ‘High Growth Segment’ is a response to the dearth of launches on the LSE by European hi-tech firms since 2010. The UK government is concerned that technology companies may opt for other locations if the country does not make itself more attractive to fast-growing companies in the sector and risks missing out on the next Apple or Google.
Greg Clark, the financial secretary to the Treasury, said the government was committed to making the UK “the best place in the world to start a business.”
He added: “High-growth companies are a key driver of job creation, and these companies will be vital to delivering the recovery. The UK has a world-leading crop of high-growth businesses, and the announcement of the High Growth Segment today by the LSE is an important step in creating the right environment for them to [hold an] initial public offering [IPO] in London.”
Alexander Justham, chief executive officer (CEO) of the LSE, said the new market would give companies “additional attractive choice” and provide “a launch pad for further success”.