London to Stock Up on Tech

on Sep 26, 2012

In a bid to stop high-growth technology companies from heading to the US stock market to seek capital, the UK Government is working with the London Stock Exchange (LSE) to make it easier for tech firms to list their shares in London, The Guardian reported on 20 September 2012.

The British Minister for Universities and Science, David Willetts, outlined the government plans on Thursday (September 20). The proposals, which are being developed in collaboration with the London Stock Exchange, would be aimed at mid-sized, high-growth tech businesses as these are currently under-represented on UK exchanges. Among the changes will be reformed rules concerning eligibility, reporting and the “free float” – the proportion of shares held by investors that can be traded. The newly relaxed listing rules would allow tech companies to list as little as 10 per cent of their business rather than the current requirement of 25 per cent.

!m[](/uploads/story/464/thumbs/pic1_inline.png)The proposed measures would have to be approved next month by the Financial Services Authority, the City watchdog, and are likely to be strongly opposed by some institutional investors who fear such a move would weaken corporate governance. But the government stands strongly behind the new regulations as they aim to avoid losing more technology initial public offerings (IPOs) to New York, following a drought in main market technology listings since early 2010.

The proposed changes come after the US government passed the JumpStart our Business StartUps (Jobs) Act earlier this year, which has eased regulatory rules for small company IPOs. With the rules eased in the US, tempting some technology firms to list on the other side of the Atlantic, the aim of the proposed changes is to make sure that as many European high-tech companies as possible who decide on an IPO float in the UK, rather than elsewhere.

London has made previous attempts to boost tech listings activity, particularly with regard to smaller companies but these have met mixed success. The LSE sub-market, Alternative Investment Market (AIM), for small, growing companies, has less onerous requirements, including no rules over the minimum proportion of its shares a company must float. Yet investors feel that the AIM does not have the prestige of a listing on the main index and has the reputation of somewhat of a “casino” environment for trading. The LSE has also launched a specialist tech segment called techMARK which aims to boost investor interest it tech stocks. But as part of the main market, listed tech companies face the same requirements as any other firm. According to Willetts the new reformed rules would provide a different opportunity ensuring that “the needs of dynamic businesses – particularly internet and technology companies – and their investors are met”.
The UK government announced that it will also be looking into current regulatory rules that may be discouraging investors from funding growth companies, as well as working with the London Stock Exchange to broaden the availability of equity capital for UK and businesses abroad who want to make the UK their global headquarters.

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