- FCA proposals would scrap premium listing
- Nasdaq boss actively courting UK companies
The UK's financial watchdog is moving ahead with a plan to loosen listing rules to encourage more companies to join the London Stock Exchange. The Financial Conduct Authority (FCA) said the planned shake-up "could entail an increased possibility of failures" but "would better reflect the risk appetite the economy needs to achieve growth".
Companies have shunned London for new listings in the past two years. London was just 18th on a ranking of exchanges by cash raised this year, behind other European exchanges and even the Muscat exchange.
The proposed listing changes include scrapping the main market's premium and standard designations, creating a single class of shares, and offering more flexibility to founders around dual-class share structures. It would also remove requirements for mandatory shareholder votes on transactions such as related-party acquisitions.
"The FCA is suggesting disclosures for significant transactions while keeping sponsor scrutiny of related party transactions, rather than the current mandatory votes," it said. "Shareholder approval for key events such as reverse takeovers and de-listing would, however, remain."
Hargreaves Lansdown's head of trading proposition, Tom Lee, said dropping shareholder votes for certain transactions was a step too far. "We are... concerned that the FCA is pushing forward proposals that do not allow for shareholder votes on significant and related party transactions," he said. "The plans to have no mandatory sunset clause on dual-class share structures has the potential to create a permanent two-tier share structure which is not welcome."
The publication of the full proposals comes after a consultation on reforming the UK listing environment to encourage more listings ended in June. The FCA said it wants to hear from "all sides of the market" on the changes before enforcing them, which it said could be in the second half of 2024.
The listing rule changes would bring the UK more in line with the US, where major tech companies such as Meta (US:META) and Alphabet (US:GOOGL) use dual-class structures to allow the founders to maintain voting control without owning a majority of the issued shares. In the UK, the current rules blocked THG (THG) from holding a premium listing — and therefore membership of the FTSE 100 or 250 — because of founder Matthew Mould's 'golden share' that allowed him to veto takeovers. He has since given up the golden share.
“We welcome feedback on our detailed proposals to make sure that we have the balance right as we seek to set the standards for the years and decades ahead," said Sarah Pritchard, the FCA's executive director for markets and international.
Hargreaves Lansdown's head of trading proposition, Tom Lee, said dropping shareholder votes for certain transactions was a step too far. "We are... concerned that the FCA is pushing forward proposals that do not allow for shareholder votes on significant and related party transactions," he said. "The plans to have no mandatory sunset clause on dual-class share structures has the potential to create a permanent two-tier share structure which is not welcome."
The proposals come after a difficult period for the UK's equity markets. Karen Snow, global head of listings at Nasdaq, told the BBC this week it believed more UK firms would follow Cambridge-based chip designer Arm's footsteps, which listed in the US in March in a $65bn (£51bn) IPO, adding that she was actively courting British companies.
This month also saw Europe's biggest package holiday operator, Tui (TUI), say it may move its listing from London to Frankfurt. Meanwhile, FTSE 100 Irish building materials group CRH (CRH) moved its main listing to the US in September and Irish building material manufacturer Kingspan delisted from London in August.
