New listings rules come into force in the UK today. The changes — which have been put in place by the country’s financial regulator, the FCA — are a bid “to make the regime more attractive to a wider range of companies,” the FCA’s head of capital markets, Helen Boyd, tells Sifted.
London’s stock markets have been declining for some time. Between 2015 and 2020, London accounted for only 5% of IPOs globally — and since a spate of tech IPOs in 2021 (Wise, Deliveroo, Made) has seen almost no high-growth companies go public.
The FCA’s changes follow the 2021 UK Listings Review, which made a set of recommendations to the government — while warning that London’s public markets were declining.
“We need to encourage more of the growth companies of the future to list here in the UK,” wrote its author, Jonathan Hill.
In response to the changes, UK chancellor Rachel Reeves said: "These new rules represent a significant first step towards reinvigorating our capital markets, bringing the UK in line with international counterparts and ensuring we attract the most innovative companies to list here."
What changes?
1/ The ‘premium’ and ‘standard’ listing segments will be merged. These categories previously had different requirements to list — for example, companies with dual-class shares could not list on the premium but could list on the standard segment.
“We had significant feedback that that was complex to understand,” says Boyd. Merging the two should also make comparing UK markets with others around the world easier, she adds.
2/ There’s now more flexibility around enhanced voting rights — such as dual-class shares, which give certain shareholders (such as founders) more voting sway than others.
When delivery giant Deliveroo IPO’d in 2021, and saw its share price swiftly plummet, many suggested that its poor performance was in part down to concerns public markets investors had around its dual-class share structure.
“Dual class shares are appropriate in some circumstances,” says Boyd. “It isn’t a model we think needs to be prevalent but we didn’t want to preclude it. It’s there so the founder-led industry feels like they have options on how they might structure their business.”
3/ The requirement to share historical financial information, a revenue track record or a clean working capital statement has been removed from the listing regime — although these will still be required by prospectus rules (which are set by legislation, not the FCA).
Is it enough?
Will it be enough to encourage tech companies to list in London?
“It’s definitely only part of the puzzle,” Boyd says; liquidity on the market and investors' familiarity with the tech industry are also factors for companies to consider.
“I do think more needs to be done — but that’s for the market and other bodies to decide.”
What do you think, readers? Have European tech companies written off London as a listing location? Get in touch.
