FCA changes listing rules to attract more UK IPOs

FCA listing rules

The Financial Conduct Authority (FCA) has confirmed changes to listing rules in a bid to encourage more companies to go public in the UK.

The revised UK listing rules will let companies create dual-class share structures within the premium listing segment for five years. Dual-class shares are popular among founders because it gives them additional voting rights and therefore more control of the company.

The amount of shares an issuer is required to have in public hands, known as free float, has also been reduced from 25% to 10%. The regulator said it will “reduce potential barriers for issuers created by current requirements”.

London’s financial watchdog has also raised the minimum market capitalisation threshold from £700,000 to £30m. It applies to both the premium and standard listing segments for shares in ordinary commercial companies.

The new rules come into force on 3 December. The reforms build on recommendations made in the UK Listing Review and the Kalifa Review of UK FinTech, which found the number of UK IPOs has fallen by about 40% from the peak in 2008.

Between 2015 and 2020 the UK accounted for only 5% of IPOs globally, with technology companies in particular choosing the US over the UK because the rules were deemed more favourable.

Despite this, there have been several high-profile tech IPOs in the UK this year. They include cybersecurity company Darktrace, fintech Wise and delivery company Deliveroo.

“We need to act to meet the needs of an evolving marketplace,” said Clare Cole, director of market oversight at the FCA. “These changes ensure the UK’s markets maintain their reputation for dynamism, helping support the new types of companies seeking the investment that drives economic growth and by giving investors more choice with appropriate protection.”

Cole added: “Over the last few months, we have moved quickly to address areas where our rules could be improved to encourage innovation in primary markets. By taking this agile approach, we are pleased that new IPOs in 2022 will be able to benefit from the revised rules.”