Introduction
On 27 March 2013, the London Stock Exchange ("LSE") launched a new High Growth Segment ("HGS") of the Main Market, with applications for admission being accepted from that date. As we highlighted in our legal update of 8 March 2013, this new platform is aimed predominantly at addressing the needs of fast growing European technology companies with a view to providing them with a transitional route to the UKLA's Official List (the "Official List").
Rulebook
Simultaneously with the launch of the HGS, the LSE also published the final version of the HGS rulebook (the "Rulebook"). The final version of the rulebook contains a number of revisions made following feedback received as part of the consultation process. The key amendments include:
Admission Criteria: Rule 2.3 and the definition of "Compounded Annual Growth Rate" have been amended to clarify that a four year range of financial data is required to demonstrate 20% growth in audited consolidated revenue over a three year period. Revenue figures must be prepared in a form consistent with that which will appear in the issuer's next published financial statements. During the consultation process, there was some call for Rule 2.1 to be amended to provide further clarity as to the meaning of "trading business". However, the LSE has resisted adopting a definition which is too prescriptive and has stated that where Key Advisers are unsure as to whether a potential applicant is a "trading business", they should contact the LSE for confirmation as early as possible in the admission process.
Reverse takeovers: Section B5 has been amended to require an issuer to seek shareholder approval of a reverse takeover, rather than approval for a cancellation of admission (prior to re-admission on completion of the takeover). An explanatory circular will need to be sent to shareholders, setting out all relevant information to enable them to make an informed decision regarding the reverse takeover (Listing Rules 13.3 to 5 (inclusive) should be used as guide in determining the contents of the circular). Where any material changes arise at any time before completion of the reverse takeover, the issuer will be required to notify shareholders of such material changes. A circular will not be required where the issuer publishes and sends to shareholders a prospectus in relation to the enlarged entity, together with the notice of the general meeting to approve the reverse takeover.
Key Advisers: The Rulebook now provides that where a Key Adviser wishes another member of its group to carry out part of its Key Adviser role, it must seek the prior written permission of the Primary Market Regulation Team.
There are a number of other amendments which have been made to the Rulebook, however, these are either minor in nature, or necessarily consequential to the substantive amendments. A detailed summary of the key provisions of the Rulebook (prior to these amendments) is set out in our previous legal update.
Other Documentation
The LSE has published on its website the various approval and application forms required for application to the HGS (including, Key Adviser and issuer declarations and an eligibility letter). In addition, the LSE has updated Form 1 (Application for Admission of Securities to Trading) to be used for all applications for admission to trading on all markets from 27 March 2013.
Overview of eligibility comparison between HGS, Premium Listing and AIM
In the table below we set out how the HGS stacks up against a Premium Listing on the Main Market and admission to AIM.
| Criteria | Premium Listing on the Main Market | High Growth Segment of the Main market | AIM Admission |
| Market Capitalisation | £700,000 minimum | No minimum requirement | No minimum requirement |
| Shares in public hands on flotation | 25% of equity shares | 10% of the number of securities to be admitted | No minimum requirement |
| Trading record | Three years audited financial information | Growth in revenue of at least 20% over the prior three financial years | None required |
| Control of assets | Control over majority of assets for three-year period | Control over majority of assets from the point of admission | No requirement |
| Advisers | Sponsor required at flotation and for certain transactions thereafter | Key Adviser required at flotation and for certain transactions thereafter | Nominated Adviser must be appointed at all times |
| Approval of documentation | Prospectus must be approved by the Financial Conduct Authority ("FCA") | Prospectus must be approved by the FCA | Admission document does not need to be approved by the FCA (an approved prospectus is only required if there is a public offer and the usual exemptions do not apply) |
| Other key criteria | 75% of business supported by revenue earning record for three-year period | Value of the securities in public hands must be at least £30 million, the majority of which must be raised at admission; and the issuer must be duly incorporated, as a public limited company or similar corporate structure, in an EEA State | N/A |
Whilst there have not been any applications to the HGS publicly announced as at the date of this update, it is early days and we will have to wait and see whether the HGS will actually prove to be a draw to issuers and investors. However, the LSE and many commentators remain optimistic about its potential. Greg Clark MP, Financial Secretary to the Treasury, recently said:
"We are delighted that London Stock Exchange is taking action to ensure that London's public markets are organised to help these companies fuel their growth. The UK has a world leading crop of high growth businesses, and the announcement of the High Growth Segment today by London Stock Exchange is an important step in creating the right environment for them to IPO in London."
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