LONDON The London Stock Exchange (LSE.L) is to launch a new niche market next month featuring less stringent listing terms for fast-growing companies wanting to raise funds on Britain's stock market.
The LSE's High Growth Segment market will allow medium-sized growth companies to go public with as little as 10 percent of their shares put on the market, unlike the LSE's main market where the normal minimum free float requirement is 25 percent.
Billed as a "stepping stone" to a premium listing, it fills the gap between the LSE's main market and its junior Alternative Investment Market (AIM) for small, growing companies which has no minimum requirement on how much of the company must be floated.
The High Growth Segment was developed in consultation with the British government, which has been considering easing listing rules for technology companies in particular since September to stem the flow of high-growth companies heading across the Atlantic in search of capital.
Companies keen to list must have achieved an annual revenue growth rate of at least 20 percent over a three-year period, be incorporated according to European Economic Area (EEA) regulations, publish an approved prospectus and offer a minimum of 10 percent of its shares in free float provided these shares are worth over 30 million pounds ($47 million).
To list on the main market, companies must make at least 25 percent of their shares freely available, unless a waiver is granted by the UK Listing Authority (UKLA).
In contrast to the UK, the United States provides a well-established hub for tech listings and has seen a continued flow of stock market flotations over the last year, while the UK has seen a drop in activity.
Europe has seen a slowdown in new listings generally over the last two years, as euro zone debt worries buffeted stock markets, and some technology firms, such as Edwards Group Ltd EVAC.O, ditched their attempts to go public in London in favor of the United States.
"By creating a segment we can build on the positive signs of market recovery in wider markets," Marcus Stuttard, the LSE's head of UK Markets told Reuters.
"Companies and advisers see this and the whole body of stakeholders and government backing equities. We are not gauging success simply on the number of companies in this segment," Stuttard said.
The announcement of the High Growth Segment coincided with the FinovateEurope event in London, a showcase of the latest products and services for the financial industry.
Exhibitor CurrencyFair, a Dublin-based money transfer service founded in 2009, said the LSE's new market segment was a tempting proposition.
"That would be very interesting," said Jonathan Potter, sales and finance director. "As long as the due diligence is straight forward and the costs of doing it are right."
However, others said a share market flotation was not always a good thing for developing companies, where companies cannot afford to take their eyes off the competition.
"You would distract so much attention from the business if you go public because you would be busy with your investors the whole time," said Conny Dorrestijn, marketing officer of Dutch banking software developer Five Degrees.
(Additional reporting by Kylie MacLellan; Editing by Greg Mahlich)