8 July 2024 The biggest reforms to London's listing rules

Full Disclosure:​

The biggest reforms to London's listing rules​

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Hi Reader 👋🏽,


Imagine you’ve poured a decade into building your business. Sleepless nights. No time for relationships and parties. You’ve paid yourself pennies. But the IPO, the big exit, is on the horizon. You’ll finally sell a % of your shares in return for a big personal payout. Your company gets a big capital injection. And then there’s the press. Oh it’s going to be so good.

But which stock market do you choose? London? Well, London is a bit dead. None of the big 2023 IPOs took place in London, and there were just 23 listings in 2023 compared to 136 in 2014. The crown jewel of UK tech, Arm, chose to list on the Nasdaq. Tui, Europe’s largest travel agency, left London for Frankfurt. Ferguson, CRH and Flutter Entertainment left the FTSE 100 to list in the US. And of those that are left on the stock exchange, about 20 are facing acquisition bids.

This is your one shot to IPO. Why settle for a lower valuation and a smaller pool of investors in London?

But, now, maybe things are going to change. The UK’s financial regulator, the FCA, is planning its biggest reform to the listing rules, the rules you have to comply with to enter the stock market and to continue as a listed company.

These include:

1. A single club: Before the stock market had two ‘clubs’, one for super serious companies (premium) and not-so-serious companies (standard). The FCA is combining the two clubs into one, so everyone plays by the same rules.
2. Easier to join: The listing rules used to require lots of information based on past performance. You don’t need three years of past revenue or detailed financial information covering 75% of your business.
3. Dual class: If founders of a company want some extra voting rights on decisions, that’s now going to be okay.
4. Less rules for big decisions: In the past, if you wanted to do something big, like buy a company, you had to get permission from shareholders. Now you just need to tell everyone what you’re doing and why, which makes the process faster and easier.

Maybe this makes London more attractive?

What does this mean for law firms?

If IPOs make a come back in London, that’s a good thing for the leading equity capital markets practices. A&O Shearman and Linklaters won a role on the recent Raspberry Pi IPO, while ahead of the expected IPO resurgence, Latham has hired the reputed capital markets adviser Mark Austin from Freshfields.

You also probably want to be a law firm with a presence in the most popular stock markets. Global companies can take their pick of London, the New York Stock Exchange, Nasdaq, Amsterdam, Hong Kong, and beyond. It helps to be a law firm that can service multiple needs.

Finally, the nature of the advice that law firms provide will change. While the FCA has relaxed the need for shareholder approvals, companies need to provide legally compliant disclosures and maintain corporate governance standards. If companies take advantage of the new dual-class changes, they’ll also need guidance on how to set these up.

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Have any thoughts? I'd love to hear your perspective below!