Equity Capital Markets - Which Market?
Guide to the eligibility requirements and continuing obligations of admitting securities to the UK's key equity capital markets
The UK has always been a popular destination for UK and overseas companies who are looking to raise finance on a public securities market. Trading on a UK market allows an issuer to access a wide investor base whilst raising its international profile and affording internationally recognised protections for its shareholders.
London offers a diverse range of markets with different levels of regulation suitable for both larger and smaller domestic and international issuers. The Main Market of the London Stock Exchange (LSE) offers established companies the opportunity to trade on an internationally recognised platform. In March 2013, the LSE launched the High Growth Segment of the Main Market for high growth companies looking to raise capital on the Main Market but which may not be in a position to obtain, or may wish to defer, a listing on the Official List. Such applicants are required to include a non-binding indication in the prospectus setting out that they intend to apply for admission to the Official List in the future. Alternatively, smaller and less established companies may wish to seek new capital and raise their profile by being admitted to trading on AIM, a multi-lateral trading facility, which has proved popular for young and ambitious companies.
Main Market – Premium, Standard and High Growth Segments
Issuers are able to choose whether to list their securities on the Premium or Standard segments of the UK's Official List maintained by the FCA and the Main Market.
In order to obtain a Premium listing, a company must comply with the listing requirements imposed by EU legislation, together with "super-equivalent" standards set by the Financial Conduct Authority (FCA) and included in the Listing Rules. These superequivalent standards are more onerous than the minimum standards required by the EU and to which standard listed issuers are subject; however, they provide additional investor protections and are considered to promote shareholder confidence and enhance the issuer's profile and reputation.
The Premium segment is only available for listings of equity shares of commercial companies, closed ended investment funds and open-ended investment companies. All other securities, including securities convertible into equity shares, depositary receipts and shares that do not meet the full set of Premium listing requirements are only eligible for a Standard listing. Both Premium and Standard listings are subject to the relevant Listing Rules applicable to their respective regimes.
Companies who may not be able to meet the eligibility requirements of the Official List (in particular, the free float requirements) may also consider the High Growth Segment of the Main Market which is a platform for high growth European companies seeking growth opportunities. These issuers are subject to the High Growth Segment Rule Book.
All issuers admitted to trading on the Main Market are also subject to the Disclosure Guidance and Transparency Rules (DTRs), Prospectus Rules, Admission and Disclosure Standards and the Rules of the LSE and EU regulation, most notably the Market Abuse Regulation (MAR) which was implemented in July 2016.
AIM is an international market for smaller and growing companies seeking to raise finance for growth. Some companies see AIM as a stepping stone to the Main Market in order to raise their profile and gauge investor interest in their business before switching to a more regulated market. However, AIM is a market in its own right and it has attracted a number of larger companies from the Main Market who have made the switch to AIM. Such companies find AIM to be a more attractive market for an IPO and other transactions due its lighter regulatory environment.
AIM is a multi-lateral trading facility which is operated and regulated by the LSE. This means that it is able to maintain a more flexible regulatory structure which is attractive to growing companies. AIM companies must comply with the AIM Rules for Companies and are also subject to continuing obligations imposed by MAR.
As an exchange regulated market, AIM companies are not subject to the DTRs, save for DTR5 in respect of major shareholding notifications of UK companies. Furthermore, whilst a prospectus is not required for an admission to trading on AIM, one may be required if, pursuant to the Prospectus Rules, a public offer is made by an AIM company.
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