LISTINGS OF SHARES AND GLOBAL DEPOSITARY RECEIPTS ON THE MAIN MARKET
Whilst there has been a global decline in the number of new public listings, the UK has long been a popular listing destination, particularly for overseas companies who are looking to raise finance on a public securities market. A listing on a UK market allows issuers to access a wide investor base whilst raising its international profile and affording internationally recognised protections for its shareholders. London offers a diverse range of markets with different levels of regulation suitable for both larger and smaller domestic and international issuers. As at 31 October 2012, there were 2493 companies listed on the UK Main Market.
Main Market – Premium and Standard Listings
In April 2010, following the FSA's lengthy review of the Listing Regime, a new regime came into effect so that issuers are able to choose whether to list their securities on the premium or standard segments of the Main Market.
In order to obtain a premium listing a company must comply with the listing requirements imposed by EU legislation, together with "super-equivalent" standards set by the FSA and included in the Listing Rules. These super-equivalent standards are more onerous than the minimum standards required by the EU; however they provide additional investor protections and are considered to promote shareholder confidence.
The premium segment is only available for listings of equity shares of commercial companies, closed ended investment funds and open-ended investment companies. All other securities including securities convertible into equity shares, depositary receipts and shares that do not meet the full set of premium listing requirements are only eligible for a standard listing.
Depositary receipts (DRs)
DRs are certificates that represent ownership of a certain number of a company's securities, typically shares, which can be listed and traded on a market independently from the underlying securities. DRs trading in the US are known as American Depositary Receipts (ADRs) whereas Global Depositary Receipts (GDRs) typically trade in an international market other than the US. In general, both ADRs and GDRs are quoted and traded in US dollars although there are some which trade in Euros and sterling. Non-UK issuers from emerging markets often choose to admit GDRs to the Official List as they are traded on the standard segment of the Main Market (where issuers only need to comply with the EU minimum requirements). Benefits to companies for pursuing a GDR programme on the Main Market include:
- the broadening of its investor base and therefore the expansion of its market share;
- the increase or establishment of liquidity which may stabilise its share price (although one should note that a listing of its shares, rather than GDRs, may expose the company to an even wider investor pool);
- the enhancement of its visibility, status and profile internationally, particularly amongst institutional investors;
- being subject to less onerous continuing obligations with regard to disclosure and reporting to the market;
- not being subject to the UK Corporate Governance Code (although the company will still need to show compliance international corporate governance standards); and
- not being obliged to appoint a sponsor by virtue of its standard listing.
Similarly, the increasing demand for GDRs is driven by the desire of individual and institutional investors to diversify their portfolios and invest internationally without the added cost and complexities of investing directly in the local trading markets. Benefits to investors for investing in a GDR programme include:
- the ability to trade easily on international capital markets and conveniently in US dollars; and
- familiar trade, clearance and settlement procedures through established clearing houses.
This note sets out a table which compares the key listing requirements for companies seeking to list their shares on the premium segment or their shares or GDRs on the standard segment of the Main Market, together with the principal continuing obligations of those companies once they have obtained their relevant listing.
Click here to view table.