The London Stock Exchange (LSE) is creating a new niche market in an effort to encourage the next big thing in tech to float in the UK.
The new "High Growth Segment", which was unveiled on Wednesday and will open its doors in mid-March, is being sold as a launchpad for rapidly expanding companies that have a value of between £300m and £600m.
The market will enable medium-sized companies that are too large for the Alternative Investment Market (AIM) but not yet ready for premium listing to raise capital while holding on to 90 percent of their firm's shares. Previously businesses looking to float on the LSE were asked to make at least 25 percent of their shares available. However, they could choose to list just 10 percent if they listed on the Nasdaq in the US.
"The UK has a world-leading crop of high-growth businesses, and the announcement of the High Growth Segment is an important step in creating the right environment for them to IPO in London," said Greg Clark, financial secretary to the Treasury, in a statement.
In order to qualify for the new market, companies will need to show revenue growth of at least 20 percent over the last three years and set out their intentions to eventually progress to the Official List.
The move comes in response to feedback from the investment community that there are a large number of UK and European businesses with ambitious development plans that are not being represented well enough through the equity markets.
"Ensuring that the UK’s fastest-growing and most dynamic companies have access to equity capital is a priority" — Alexander Justham, LSE
"Ensuring that the UK’s fastest-growing and most dynamic companies have access to equity capital is a priority," said LSE CEO, Alexander Justham, in a statement. "The High Growth Segment will [give] these companies a launchpad for further success."
The news was welcomed by high-growth technology companies, such as cloud email archiving company Mimecast. "The flexibility of this new route to market certainly puts the LSE back on the radar as a consideration for companies considering an IPO," said Peter Bauer, CEO of Mimecast. "I am certain the reduction in the minimum float requirements, in particular, will attract those previously wary of the process of going public and help make London a beacon for tech entrepreneurs and investors."
Meanwhile, Tech City CEO Joanna Shields said that the move sends a strong signal to overseas firms that Britain is open for business and that it builds on Britain's attractive investment incentives, tax credits and rate reductions.