The London Stock Exchange is launching a new niche technology market to encourage the next Twitter, Facebook or Google to float in the UK.The new so-called High Growth Segment will allow entrepreneurs to raise cash while keeping up to 90% of their firm’s shares.
The LSE’s normally requires companies to make at least 25% of the shares available as a free float on the main market.
The government has been worried that British technology companies may opt to go to Silicon Valley if the UK does not make itself more attractive.
Companies can choose to list just 10% of their shares on the Nasdaq in the US. No European hi-tech firms have floated on the LSE’s main market since 2010.
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”.
“High-growth companies are a key driver of job creation, and these companies will be vital to delivering the recovery,” he said.
“The UK has a world-leading crop of high-growth businesses, and the announcement of the High Growth Segment today by London Stock Exchange is an important step in creating the right environment for them to IPO [initial public offering] in London.”
Alexander Justham, chief executive of the LSE, said the new market would give companies “additional attractive choice” and a “launch pad for further success”.
The High Growth Segment is intended to be a stepping stone for medium-sized companies, worth between £300m-£600m, between floating on Aim and listing on the main market.
John Hammond, equity capital markets partner at Deloitte, said: “Aim has been doing its job as an incubator for UK companies. What is exciting about the launch of the High Growth Segment is that larger UK technology and other high-growth companies now have a real alternative to a premium listing or joining Aim and that can only be a good thing for London.”
He added: “Debt markets have been constrained and are expensive to tap, particularly in Europe following the banking crisis. Many companies have been forced to look to their own balance sheets for expansion capital. Other UK tech business owners have turned to private equity investors for finance, though of course, they have had to cede some control of their business in doing so.
“The High Growth Segment should create a more level playing field and make the UK tech sector more competitive globally,” he said.
In order to join the High Growth Segment, companies must prove they have been growing at a rate of at least 20% for the past three years, and “clearly set out their intention” to join the main market eventually. The new market is expected to be launched next month.
Michael Acton Smith, chief executive of Moshi Monsters‘ creator Mind Candy, said: “We are proud to be a British company and love being based in London. We welcome these new initiatives to make the London financial markets more attractive to the many fast-growth tech companies that are based here.”
This article originally appeared on guardian.co.uk
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