LSE launches new high-growth segment of the Main Market

The London Stock Exchange (LSE) has launched a new “high growth segment” of the Main Market for EEA-incorporated issuers valued at £300-600 million with revenue growth of at least 20% over the previous three financial years.

The new segment was officially launched on 27 March 2013. It offers admission to trading to the main market for high growth businesses that intend in due course to seek admission to the Official List but that may not yet meet the applicable eligibility criteria, in particular due to having a lower proportion of securities in public hands. Applicants must raise more than £15 million on admission, and at least 10% of their shares must be in public hands.

Although the Main Market is a regulated market, issuers on the new high growth segment will not be admitted to the Official List and will not therefore be ‘listed’ or subject to the Listing Rules. Accordingly, it will no longer be correct to refer to the Main Market as a market for ‘listed’ securities because issuers on the high growth segment will be unlisted.

As the Main Market is a regulated market, issuers admitted to the high growth segment are subject to the investor protection rules imposed by various EU Directives, including the Prospectus, Market Abuse and Transparency Directives. This means that:

(a) on admission, issuers must publish a prospectus approved by the Financial Conduct Authority (the successor to the FSA) or their own national regulator, which must include audited historical financial information and the usual statement on working capital;
(b) issuers must announce all price-sensitive information in accordance with the Disclosure and Transparency Rules;
(c) issuers must publish annual and half-yearly financial information, and interim management statements in accordance with the Disclosure and Transparency Rules;
(d) major shareholders must notify the issuer, and in turn the issuer must notify the market, of holdings above 3%;
(e) directors and PDMRs must notify the issuer, and in turn the issuer must notify the market, when they deal in the issuer’s shares.

Although, the above rules also apply to issuers in the standard listed segment, the high growth segment sits somewhere between the premium and standard listed segments of the Main Market in terms of investor protection. This is because issuers have to comply with additional rules issued by the LSE called the High Growth Segment Rulebook. That rulebook is far more exacting than the Listing Rules that apply to companies in the standard listed segment, except in relation the free float requirements. Under LR14 at least 25% of an issuer’s shares must be held in public hands to be admitted to the standard segment, although the FCA may allow a lower percentage as long as there are sufficient to create a proper market in the shares.
Admission to the high growth segment is determined by the LSE on the basis of information and submissions relating to eligibility given by the Issuer and its Key Adviser and on the basis that a prospectus has been approved by the FCA or other EEA State competent authority.

Under the LSE’s High Growth Segment Rulebook, issuers are required to:

(a) appoint a ‘key adviser’ in circumstances similar to those in which premium listed issuers must appoint a sponsor, e.g. for admission and when undertaking a major or related party transaction;
(b) announce proposals to enter into a major or related party transactions, although like AIM companies shareholder approval is not required unless it is a reverse takeover;
(c) announce certain events (such as board changes or changes to capital structure);
(d) comply or explain against their national corporate governance code or another chosen code;
(e) publish certain key documents on their website, including copies of its constitutional documents, most recent financial information and all RIS announcements made during the previous 12 months.

For further information, see the LSE website (at www.londonstockexchange.com/companies-and-advisors/main-market/companies...).