The London Stock Exchange’s High Growth Segment was unveiled with much pomp in April 2013, with one of its figureheads being serial angel investor and Index Ventures partner Robin Klein.Klein told me in 2012 that the need for this kind of listing mechanism was needed because the LSE was not providing an outlet for fast-growing companies wanting to take the next step up. At the time the High Growth Segment was launched, LSE CEO Alexander Justham stated that it would provide an “additional attractive service” and be a “launch pad for further success”. The powers that be in the government and wider economy had become concerned that technology companies in the UK were either listing on the New York Stock Exchange or NASDAQ, or simply selling out altogether. The eligibility criteria set out was: incorporation in an EEA state; issue of equity shares only; and being a revenue-generating business with historic revenue growth of 20 per cent (CAGR) over a three year period. Businesses were also required to conduct a minimum free float of 10 pre cent with a value of at least £30m (majority of the £30 million must be raised at admission), and appoint a “key adviser” (who must be a UKLA approved Sponsor) to be retained at admission and for specific matters including notifiable transactions. So far only takeaway delivery service JUST EAT and digital advertising company Matomy have used it – with JUST EAT transferring to the Premium List shortly afterwards. To find out more, I put the question of why more hadn’t used the High Growth Segment to Marcus Stuttard, head of UK Primary Markets and head of AIM. He indicated that the first thing to realise was that, prior to launch, the decision was made to call it a “segment”, rather than a market in its own right, as it was just another choice and entry to the markets. “We identified a relatively small segment, or niche, of businesses that were likely to be too big for AIM at time of admission but not big enough for a Premium Listing on the Main Market,” he explained to Real Business. It is, he said, also largely a concern about the free-float requirements on the Premium List that mean 25 per cent of the company must be put up at time of listing. With many of the “niche” identified by Stuttard and the team prior to launch being fast-growth technology companies charged with venture capital cash, many of these investors are keen on continuing to retain stakes and see the future upside of a portfolio company. The segment therefore provided some flexibility, putting the UK on an equal footing with markets such as those found in the US. A lower free float, he added, makes the transition from private to public “that bit easier”. Read more about the High Growth Segment:
- JUST EAT: An appetite for high growth?
- SMEs urged to look at equity finance
- Paul Sulyok: “My motto is get up, crack on”
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