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London Stock Exchange High Growth Segment opens

The London Stock Exchange’s High Growth Segment is open to applications from today

In a regulatory notice published on Thursday, the London Stock Exchange (LSE) announced that its High Growth Segment is now open for applications from key advisers and from companies for admission to trading from this week.

The LSE has also published the High Growth Segment rulebook, which lays out the key rules for companies wishing to join.

The London Stock Exchange (LSE) High Growth Segment was announced last month as a solution to meet the capital needs of Britain’s fast-growing companies – essentially a way to keep firms growing in Britain, stopping them from emigrating across the pond for growth capital.

Rules

The High Growth Segment rulebook, published yesterday, confirms that the new market is open to firms incorporated in the European Economic Area only, and is intended specifically for “revenue-earning commercial businesses”.

Specifically, companies wishing to apply for entry on the High Growth Segment must be able to demonstrate growth in revenue of at least 20 per cent (on a compound annual growth rate basis) over the prior three financial years.

Additionally, companies must agree to open 10 per cent of the number of securities to the public, with a value of at least £30m. This, says John Lane, co-head of equities at law firm Linklaters, makes the High Growth Segment particularly attractive, as it allows founders to keep up to 90 per cent of their company’s shares.

“We welcome the creation of the High Growth Segment, a new platform which is tailored for high-growth medium-sized companies. This platform enables such companies to list with a 10 per cent free float rather than the normal 25 per cent, which can act as an obstacle to a London listing.”

Indeed, the New York City-based NASDAQ market already allowed companies to list just 10 per cent of their shares, which has led some British firms to move their companies to the US to dip their toes in the public markets.

Attracting the best

The High Growth Segment rulebook – at just 30 pages long – is a digestible document that shows just how eager the LSE is to attract high growth firms.

Compared to the established routes into the London Stock Exchange market, the High Growth Segment is tailored to make it as easy as possible for fast-growing companies to join. For example, unlike on the AIM market, in the High Growth Segment, companies only need to hire a key adviser at admission and to seek advice for certain specific events.

For companies that decide to join, the High Growth Segment will open access to capital on an ongoing basis. It is likely that the market will attract a diverse pool of investors, which will be hungry for fast-growing companies – tech firms in particular. The High Growth Segment is also designed to be a stepping stone towards the main market:

“The segment is a launch pad for companies that may not meet the eligibility criteria to join the Premium segment of the Main Market at the time of admission, in particular the free float requirement,” official documents about the High Growth Segment explain.

“They are larger than a typical AIM company, and have longer term aspirations to join the Premium segment of the Main Market. [The High Growth Segment] is a dedicated segment that acts as a launch pad for growth businesses to increase their visibility with the analyst and investor community, as well as enhance their business profile with existing and potential customers and suppliers.”

Both government officials and the LSE will be holding their breath to see whether the High Growth segment is attractive enough for Britain’s best.

So far, so good: last month, upon announcement of the High Growth Segment, Michael Acton Smith, chief executive of Mind Candy welcomed the news. He said: “We are proud to be a British company and love being based in London. We welcome these new initiatives to make the London financial markets more attractive to the many fast-growth tech companies that are based here.”

Does this mean we can expect to see Mind Candy joining the public markets soon? Watch this space.

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