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London Stock Exchange: UK firms can raise more money here than overseas

Sam Shead | Jan. 13, 2014
Recent IPOs suggest London is still losing out to New York as a listing destination.

Another factor that has led to some UK tech start-ups listing in the US, such as Candy Crush creators King.com, is the fact that they can float a smaller chunk of their business on the likes of the Nasdaq than they would have been able to had they listed on London markets.

London's new market
LSE and Tech City UK set out to address this issue last spring when they launched a new market called the High Growth Segment (HGS). The HGS, which is not exclusively for tech companies, is being sold as a launchpad for rapidly expanding firms that have a value of between £300m and £600m. It is designed to enable medium-sized companies that are too large for the Alternative Investment Market (AIM) but not yet ready for premium listing to raise capital while holding on to 90 percent of their firm's shares.

Previously businesses looking to float on the LSE were asked to make at least 25 percent of their shares, whereas they could choose to list just 10 percent if they listed on the Nasdaq.

However, not one single company has listed on the new market, despite the fact it was first announced nearly a year ago.

"There are no listings on HGS yet but we have seen a number of companies join the pipeline," said Stuttard, before going on to reveal that companies looking to list on the LSE are waiting right up until their admission before deciding which market to IPO on.

One company that was tipped to IPO in London this year, possibly on the HGS, is music-identification service Shazam. However, chairman Andrew Fisher told Techworld last month that the Future Fifty start-up isn't sure if it would list in the UK or the US, should the time arise.

Fisher, who was the CEO of the company from 2005 to May 2013, said there are pros and cons to listing in the UK. "I think some people would argue companies get better valuations in North America," he said. "But you can also see plenty of examples in the UK where investors have backed digital stocks over recent months."

Meanwhile, TechMarketView chairman Richard Holway argues that the HGS has been unsuccessful so far. "If it had [been successful] we would be seeing some IPOs by now and those like Shazam and Sophos wouldn't be thinking Nasdaq," he said.

So while the London Stock Exchange, the UK government and Tech City UK are doing their best to facilitate the pain of listing in the UK through initiatives such as the High Growth Segment and the Future Fifty programme, it would appear that more needs to be done in order to convince certain firms that London is the best place for them to IPO.

 

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