High growth companies in London's Tech City could get a fast track to the London Stock Exchange under new regulations being proposed by the government.
The proposals state that such companies should be offered a “new route” to the UK IPO market, with reformed eligibility criteria, reporting requirements and rules on “free float” (the proportion of shares held by investors that can be traded). These reformed rules will aim to ensure that the needs of internet and technology companies are met.
The scheme will target European mid-sized fast-growing businesses, which the government claims are currently under-represented on the UK's public markets. The idea is to act as a “launch pad” for companies seeking a full premium listing.
“There is a rich crop of innovative European high-tech companies that will be going to the financial market over the next few years. We’re determined to make sure that as many as possible should do an IPO and float in the UK, not elsewhere,” said Universities Minister David Willetts.
“I have no doubt that this new route to market will help to bring new investment and new jobs to London in the months ahead.”
The government also plans to investigate the current regulatory rules that may be deterring investors from funding growth companies, and will work with the London Stock Exchange to make equity capital more easily available to businesses looking to set up shop in the UK.
Research by Nesta shows that over 800 companies have received investment from UK VC funds raised between 2006 and 2009. An additional 2,700 companies received investment from European funds raised over the same period.
Ten percent of firms that received investment from UK or European VC funds raised between 1990 and 2005 went on to make an IPO, according to the research.
“We've seen over the last 20 years, more and more great companies being born in Europe and Israel, but very few of these businesses have taken their next stage of growth by accessing one of the world's most powerful capital markets,” said Neil Rimer co-founder of Index Ventures.
“It's great news for entrepreneurs everywhere that London is stepping up and not just being a great place to start a company but to build huge sustainable businesses.”
Xavier Rolet, chief executive of the London Stock Exchange Group, added that attracting both entrepreneurial businesses and the investors that support them to the UK is key to driving growth and generating jobs.
The new scheme aims to replicate the success of President Obama’s JOBS Act, which lowered the regulatory burden for growth companies wanting to gain listings on US public markets. It is part of ongoing attempts to make Britain one of the best places in the world to start, run and grow a business, the government said.