London is now formally getting its upgraded listing rules as the City seeks to compete with New York for IPOs and new capital issues.
The Financial Conduct Authority (FCA) today published the policy statement for the proposed changes which follow the Kalifa fintech review earlier this year. The new rules are effective tomorrow, December 3.
They mean that founders with a premium listing on the London Stock Exchange mainboard will be able to retain a separate class of share, for a period of five years, which will see them have preferred control of the company.
At the same time, the minimum free float of shares in public hands will be 10% down from the previous minimum of 25%. The minimum market capitalisation will be £30mln.
The Kalifa review, conducted by WorldPay chief executive Ron Kalifa (commissioned by Chancellor Rishi Sunak), recommended that the City must improve the listing environment to make London more attractive for growing tech companies.
It comes also as London seeks to compete for so-called ‘SPAC business’ - the popular contemporary method of floating companies on stock markets by first listing smaller shell companies which are often used to paper new shares for use in larger transactions. Such deals have been wildly popular in New York but lagged in the UK where the initially listed vehicles are too constrained by regulation.
Lighter regulation of these shell companies is expected to result in more deals generally, whilst also triggering more smaller companies coming to market sooner.
“Rule tweaks will encourage more companies to list in the UK providing welcome opportunities for investors,” said Anne Fairweather, Hargreaves Lansdown’s head of Government Affairs & Public Policy.
“The Government must now look to address wrinkles in the way reams of information must be disclosed through the use of old-fashioned prospectuses, which currently limit the attraction of offering new capital raisings to ordinary investors.”
“Retail investors must have the opportunity to invest at IPOs and greater protections with secondary fund raises.”
Fairweather added: “As always, investors must weigh the opportunities on offer against the risks, we’d expect individual smaller companies to make up fairly small parts of a client’s overall portfolio.”
A separate relaxation of rules effective in August was recently first tested as Hambro Perks Acquisition Company joined the London bourse last week.
The SPAC plans to raise between £140mln and £150mln, with Hambro Perks, the London-headquartered investment firm behind the listing, contributing £35mln.
Under London’s new SPAC regime introduced on 10 August, shell companies raising at least £100mln will not have trading in their shares suspended after a potential acquisition is announced, alternatively IPO proceeds must be ring-fenced and investors will get to vote on the proposed ‘de-SPAC’ deal, among other investor protections.
London SPACs must find and acquire a target within two years, subject to a 12-month extension with approval from shareholders and a further six months if a ‘de-SPAC’ deal is close to being concluded.