As part of Seedcamp Week, Google’s Campus building in London this morning provided a stage for David Willetts, Minister of State for Universities and Science, to announce that the UK government aims to – eventually, maybe – relax the listing rules for high-growth companies on the London Stock Exchange.
“It's both terrifyingly interesting and interestingly terrifying”
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Willetts said they looked at the American JOBS act and the rules for listing on U.S. London Stock Exchange competitors like NASDAQ, and brought forward two key points where the UK government thinks it can make progress in terms of bettering the public listing environment this side of the pond.
The end goal is clear: to try and stop British firms, and by extension European and Israeli ones, from opting to “sell out” early or float their shares in the United States or elsewhere, rather than in London.
Basically, the UK government, in conjunction with the London Stock Exchange, plans to create a new route to the UK IPO market, which is likely to feature “reformed rules on free float, eligibility criteria and reporting requirements”.
This route is meant to provide a sort of “launchpad” for companies seeking a full Premium listing – but it’s early days and details were scarce.
One key change Willetts said the UK gov wants to make is to allow growth companies to list a smaller part of their business than required today – 10 percent of shares, down from a current requirement for 25 percent, according to the FT.
Another proposal is to reduce the reporting requirements for companies, but, again, not a lot of details were provided at this point.
The primary aim of the policy is to make the London Stock Exchange a more attractive place for tech companies to go public. It achieves this by creating provisions for high-growth companies on the LSE, reducing minimum float requirements and enabling venture-backed businesses to adopt appropriate corporate governance procedures.
Willetts afterwards – rather briefly – participated in a discussion with entrepreneur Michael Acton Smith (founder and CEO of Mind Candy / Moshi Monsters), investors Robin Klein (Index Ventures, TAG) and Neil Rimer (partner at Index Ventures) and Rohan Silva, Senior Policy Adviser to the Prime Minister, among others:
It’s worth noting that Index Ventures, the big pan-European venture capital firm, is playing a crucial role in pushing the relaxed London IPO rules.
In a blog post, the firm says:
We know of at least 20-30 IPO-ready European tech companies today, like Criteo, Wonga and Moshi Monsters, that are poised to capitalize on the global internet economy and perhaps enter the pantheon of great public companies.
The U.K. is home to at least 10 of these high-growth companies, while 6 are in Germany, 5 are in France and the rest are distributed across Israel, Russia, Spain, Italy, the Nordics and Eastern Europe.
We also know of dozens of companies that might have chosen to go public and double down on their growth, but instead chose to sell themselves to the likes of eBay (Skype: born 2003, sold 2005), Electronic Arts (Playfish: b. 2007, s. 2009), CBS (Last.fm: b. 2005, s. 2007) and Amazon (Lovefilm: b. 2003, s. 2011), because an IPO was not considered a realistic option.
We hope this sentiment will begin to shift, starting today.
As the FT points out, any measures would have to be approved by the Financial Services Authority, the London City watchdog, and will likely face strong opposition from a number of institutional investors. To be continued, no doubt.
(Top image Credit: BEN STANSTALL / Getty Images)