On 27 March 2013, the London Stock Exchange (LSE) launched the High Growth Segment, a new Main Market segment which sits alongside the LSE’s existing Premium and Standard segments and provides an alternative route to market for European companies.
Lower free float requirement
The High Growth Segment is intended to attract medium and large sized high growth companies that do not meet the eligibility criteria of the Premium Segment, in particular in relation to the percentage of shares required to be in public hands (the “free float” requirement). While companies seeking admission to the Premium and Standard segments are required to have at least 25% of their shares in public hands at the time of admission, the free float requirement for the High Growth Segment is 10%, provided the shares in public hands also have a minimum value of £30 million. The LSE hopes that this lower free float requirement will encourage founder shareholders, including venture capital and private equity investors, to float companies on the High Growth Segment at an early stage of a company’s development.
Other eligibility criteria
In addition to the 10% free float requirement, a company seeking to join the High Growth Segment must:
- publish a prospectus approved by the UK Listing Authority (or the competent authority of another European Economic Area state);
- be able to demonstrate growth in revenues of at least 20% over the three years before admission (on a compound annual growth rate basis);
- be a revenue generating trading business (and not, for example, a mineral resource company at exploration stage or an investment entity);
- control the majority of its assets; and
- be incorporated in the European Economic Area.
The LSE expects the High Growth Segment to attract companies with longer term aspirations to join the Premium Segment but which may be larger than typical AIM companies and so could benefit from using the High Growth Segment as a stepping stone towards a listing on the Premium Segment.
As companies admitted to the High Growth Segment are not listed on the UK Financial Conduct Authority’s Official List, they are not subject to the Listing Rules. Instead, these companies must comply with the requirements of the High Growth Segment Rulebook which, amongst other things, sets out the continuing obligations which apply to all High Growth Segment companies. These obligations are more flexible than the Listing Rules and are broadly similar to the AIM Rules. For example, where a company admitted to the High Growth Segment enters into a notifiable transaction (i.e. a transaction which gives a result of 25% or more under the “class tests” set out in the High Growth Segment Rulebook), the company will be required to publicly announce details of the transaction but will not be required to obtain prior shareholder approval. The High Growth Segment is, however, a “regulated market” for the purposes of the relevant EU directives so the Prospectus Rules and Disclosure and Transparency Rules do apply to High Growth Segment companies.
All companies seeking admission to the High Growth Segment are required to appoint a Key Adviser (which must be a UK Listing Authority registered Sponsor) at admission and also to advise in relation to specific matters set out in the High Growth Segment Rulebook, such as notifiable transactions.
The LSE has published a useful comparison of the Premium, Standard, High Growth segments and the AIM market here.