THE LONDON Stock Exchange is trying to tempt fast-growing tech firms away from Silicon Valley by launching a “high growth segment” with less onerous listing rules.
The exchange said yesterday that companies with an annual growth rate of 20 per cent over three years will from next month be able to join the segment of the main market with a minimum free float of just 10 per cent.
This compares to the usual requirement of a 25 per cent free float.
“Ensuring that the UK’s fastest growing and most dynamic companies have access to equity capital is a priority for London Stock Exchange,” said chief executive Alexander Justham.
“The High Growth Segment will provide an additional attractive choice, giving these companies a launch pad for further success.”
The changes, backed by the government after months of consultations, should provide investors with easier access to the UK’s future tech success stories, said Osborne Clarke corporate law partner Jonathan King.
“It’s obviously great news for high-growth companies, but it’s also great news for private equity houses who, in light of the more relaxed free float requirement, have an additional liquidity channel available to them.”
Some market watchers, including governance body Manifest, questioned whether such a small free float requirement would attract long-term investors to UK firms.
And Deloitte pointed out while tech firms have abandoned the LSE in the last three years, smaller companies already use the junior Alternative Investment Market as a launch pad.
Around 30 tech firms have listed on Aim in the past three years, it said, including software group WANDisco’s oversubscribed £15m initial public offering last year.
The scheme mirrors the Jobs Act in the United States, which last year streamlined float requirements for companies generating less than $1bn (£644m) annual revenues.
Manchester United was criticised for using the Jobs Act exemptions for its $234m IPO in New York last summer.