Q and A: High growth segment
Q What’s the High Growth Segment?
A It’s an attempt by the London Stock Exchange to keep British technology firms in the country, rather than waving off the UK’s next answer to Google as it takes the well-trodden path to the Nasdaq or NYSE once it becomes big enough to list.
Q What makes it better than the ordinary stock market for these companies?
A The exchange has dropped some of the normal barriers to floating for companies that have incorporated in a European country, posted revenue growth of 20 per cent a year for three years, and are willing to float at least 10 per cent of their equity for at least £30m. The low free float rule – down from 25 per cent on the main LSE – means fast-growing firms with lots of venture capitalists on board can keep those ties while raising fresh money.
Q Sounds good, but is it helping the LSE keep tech firms here?
A The stock exchange has an uphill climb to compete with the US markets, which come with an established investor base that has spent a decade pouring cash into the Facebooks and Twitters of this world. This dearth of big tech investors, plus a general IPO drought until a few months ago, has meant the HGS has not been used since it launched in March to much fanfare.
Q So when will there be growth in the High Growth Segment?
A We’ve almost certainly lost King to the New York market, but Just Eat sees the HGS as a distinct possibility. It remains to be seen whether others looking at IPOs, such as Mimecast or Mind Candy, can be persuaded to commit to the UK.