High-Growth Companies erience I
n February, the London Stock Exchange published a draft rulebook for the new “High Growth Segment” (HGS) of the Exchange’s regulated market. The HGS is intended to provide access to the capital markets for fast-growing mid-cap companies (particularly in the technology sector).
Although the rulebook itself is “a draft for consultation,” the publicity at the time stated that the HGS was scheduled to open in March 2013 and so the general positioning set out in that draft must be regarded as being settled. From that positioning, we can see that the HGS is intended to act as a stepping stone to a Premium Listing on the Main Market of the Exchange, allowing companies access to Main Market capital earlier in their life by providing reduced eligibility criteria and lighter ongoing compliance requirements in certain specific areas.
The HGS must, if it is to be successful, provide liquidity to companies by attracting interest from the Main Market’s investor base, whilst still providing enough flexibility to be attractive to potential listing candidates. It is this balancing act that the Exchange has attempted to address in the draft rulebook.
What companies would list on the HGS?
The rulebook permits applications to the HGS from European companies in the £300m+ market capitalisation range, and which can demonstrate a compound annual growth in revenues of 20% over the past three financial years.
Although not stated in the rulebook, the publicity around its launch was clear that the HGS targets the technology sector in particular. Even in a difficult climate for Main Market IPOs of any stripe, the reluctance of technology companies to pursue a Main Market listing has been marked – and rumours persist that many European technology companies in this range are considering a NASDAQ listing to access capital. Many commentators have drawn the conclusion that this is the Exchange’s attempt to bring those potential NASDAQ companies to the market in London instead.
AIM does provide a route to the capital markets for technology companies, with roughly 10% of the 1,000 AIM companies being in the sector. AIM’s status as a junior market with more relaxed regulation, however, has made it unattractive to certain categories of investor - which in turn has created the perception that there is little or no liquidity on the market. In addition, only 5% of the companies on AIM have a capitalisation over £250m – so although there is no official cap on the size of an AIM company, the general impression is that it is a market for smaller companies. Both of these perceptions can be problematic for large institutional investors.
What would attract companies to the HGS?
The HGS rulebook only requires that 10% of an applicant company’s share capital must be in public hands. This is significantly lower than the 25% requirement of the Main Market, and matches the requirement of NASDAQ. The lower public float directly addresses one of the main perceived issues with a Main Market listing – that founders and VCs or other private financial backers are obliged to give up too much of the company in order to secure the listing.
55 entrepreneurcountry
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58