The UK’s financial regulator, the Financial Conduct Authority (FCA) has proposed new rules to simplify domestic public listings, which is intended to attract more tech and early-stage companies to its exchange. In a consultation published on the 3rd of May, the FCA set out plans to replace the existing premium and standard listing segments with a single category. The creation of a single category is intended to remove barriers for early-stage companies looking to access the premium segment. Currently, the premium and standard segments have different eligibility requirements that a company must meet to list, with the premium requiring a higher standard of corporate governance.
The FCA’s proposed reforms include removing mandatory shareholder votes for transactions including acquisitions, which is understood to be one of key factors in why SoftBank-backed chip-maker Arm opted for a US-only IPO. There are also plans to encourage more dual class share structures, which are relatively uncommon in the UK compared with other listing destinations such as the US. The FCA’s proposal has been welcomed by investors as a positive step in increasing the attractiveness for listing in the UK.
“These reforms will provide a boost for the country’s important tech sector by allowing companies easier access to public markets in London and encourage ‘local heroes’ to be able to list here rather than overseas,” said Dawn Capital general partner Haakon Overli.
According to the UK Listing Review, the UK accounted for only 5% of global IPOs between 2015 and 2020. PitchBook data suggests that VC-backed public listings have also declined, with only 13 completed in 2022 in the UK and Ireland. However, the global downturn is a major driver of the decrease in the number of listings. Since 2021, the UK has been putting in place measures to improve the listing regime, including lowering free float levels, allowing certain types of dual class share structures, and introducing digital financial reporting.
FCA CEO Nikil Rathi said in a statement, “Our proposed reforms would significantly rebalance the burden of regulation to the benefit of listed companies and investors who are willing to set their own risk appetite and terms of engagement. We want to encourage more companies to list and grow in the UK, versus other highly competitive international markets.”
The proposal from the FCA is a significant move for the UK’s financial sector, which is hoping to capitalise and benefit from the boom in tech and early-stage companies. The simplified public listing rules are intended to create a more level playing field, with fewer barriers to entry for companies looking to list. The move is expected to encourage more companies to list in London rather than overseas, which could help to boost the country’s economy as well as create more jobs. Overall, the proposal from the FCA has been welcomed by investors and industry experts, who see it as a positive step towards making the UK a more attractive destination for tech and early-stage companies.