How to make an Initial Public Offering on the London Stock Exchange in 10 steps

3. Choosing a Premium or Standard Listing

Although the two are quite similar, they do have their differences.?

Generally speaking, a Standard Listing is easier to apply for since it features lessmandatory corporate governance standards and, once listed, your company will havefewer continuing obligations after the float.

But to apply you require:

  • At least 25 per cent of shares to be held in public hands in the EuropeanEconomic Area at the time of your admission;
  • The value of the securities to be listed must be at least ?700,00 in share receipts;and
  • The company must be approved by the UKLA and the Main Market of theExchange alike.
In the case of a Premium Listing, you need:

  • A sponsor;
  • To comply with the Listing principles;
  • To maintain financial reporting procedures; and
  • To prepare audited accounts for the last three years.
There is a definite advantage to a Premium Listing. Although you need to comply to requirements higher than the EU minimum standard, investors will have more confidence your business.

4. Choosing a sponsor

Possibly the most important step in the IPO process is choosing yourself an ‘underwriter’. Underwriters raise money for companies using public equity markets.

You can find a full list of sponsors on the Financial Services Authority?s (FSA) website. Another way to find yourself a sponsor is to hold a ‘beauty parade’. This will allow you to ask them a series of questions in order to get a feel of what working with them would be like. However, this is a two-way system, with underwriters looking to understand what makes your business tick before they agree to take on the listing.

According to the London Stock Exchange: ?They will be required to submit an eligibility letter to the UKLA setting out how the company satisfies a number of the Listing Rules? and will be obliged to consider ?whether the admission of the equity shares would be detrimental to investors’ interests.?

Companies should be wary, and keep experience and, perhaps, reputation at the forefront of their minds as these investment banks will often hold a number of shares in the company in order to create a market for the stock. This will make sure that any significant investors are in it for the long-run and not just merely looking for short-term wins.

The process also includes the buying of stock from the issuer and then selling the stock to the public and ensuring that all Listing Authority and Stock Exchange rules are met, as well as them being placed in control of contacting institutions to place shares. 
Essentially, they should be able to pull together a syndicate of investors to back the offering.

Russ Shaw, founder of Tech London Advocates, suggests that the best investors “understand that companies need time to grow. Entrepreneurs need to make sure investors agree on a long-term growth strategy. 

“It is entirely pointless to aim for profitability in three years time if resource could be better invested in attracting users and growing the company. Reaching profitability in seven or ten years is not a sign of failure, but the sign of a company aiming for a more successful IPO.”

But ‘bookrunners’ and lawyers should also be added to your IPO team at this point.

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