The review, which is being run by former EU commissioner Lord Jonathan Hill, is asking for views on free float sizes, dual class share structures, prospectuses and a number of other issues, such as whether UK requirements around dual and secondary listings act as a barrier to dual listings in the UK.
Smaller free float requirements, for example, would allow sellers to keep hold of more of their companies at IPO, meaning that deals could be priced at market-friendly discounts, which often leads to the price rising once listed.
Dual class share structures, often derided as antithetical to the principle of one share, one vote, are increasingly desired by many entrepreneurs, who intend to run their businesses for the long term. These structures are also, in reality, not that unpopular with large equity investors.
Year after year, asset managers continue to buy into high growth US IPOs where dual class structures are ubiquitous, and an element of dual class listings was also used in the UK this year.
One feature in the September listing of The Hut Group was a golden share for its founder and CEO, Matthew Moulding. It allows him to veto any takeover attempt in the next three years. Its inclusion meant THG had to be listed on the Standard Segment of the London Stock Exchange rather than the Premium Segment.
Several equity capital markets investors who have spoken to GlobalCaptal since the consultation was launched in November are urging Lord Hill to take action to change UK listing rules, bringing the LSE more into line with exchanges such as the Nasdaq or Amsterdam, which has started to establish itself as a hub for European tech firms.
A more flexible UK listing regime would tempt more tech companies to London, including possibly Deliveroo next year. The food delivery firm is likely to float in 2021, and while London is a possible listing venue it could go to New York.
The UK should continue to demand the highest corporate standards of companies that list in London, but, with a few small changes to its listing regime, it could radically improve the attractiveness of the London Stock Exchange.
Equity investors want these changes and, as the UK leaves the European single market in January, the government should cement its commitment to ‘Global Britain’ by ensuring that the London Stock Exchange remains one of the most attractive equity hubs in the world.
Equity market participants can respond to the government’s request for evidence until January 5.