Upping the ante: UK’s rule of law is perfectly positioned to embrace LSE listing reform

The London Stock Exchange (LSE) is an international player, with about 50% of the stock owned by international investors, but Amsterdam surpassed London as Europe’s largest share trading centre in January.

Now we are out of the European Union, we need to promote investment from around the world and be recognised as a forward-thinking institution when it comes to business.

Technology companies are the dominant force across the globe, but companies such as Apple, which hit a valuation of $2trn in August of last year, more than the total value of the FTSE 100, need to start somewhere.

In the past five years, we have seen LSE tech listings shoot up from 5% to 30%, and the LSE is today home to about 1,100 companies.

But there is room for improvement, with NASDAQ listings hitting 3,300 last year and tech companies being encouraged to list in the UK is key.

We fear what we do not know, but the reality is that the new special purpose acquisition companies (SPACs) which have exploded in the US, are becoming a genuine and proven mechanism for listing. With New York filings just short of 180, Amsterdam looks like the preferred place to list SPACs in Europe.

Without Lord Hill’s recommendations on embracing the listing of these blank-cheque companies, we may not only be foregoing foreign investment, but losing UK businesses as they look to list elsewhere.

At this point in time, the minimum free float required for UK-incorporated companies stands at 25% (the proportion of shares that are freely traded), which acts as a barrier to entry for fast growth companies looking to list on the LSE.

Founders worry about retaining control after an IPO and investors are deterred by the fact they might be forced to sell their shares.

Both the Kalifa and Hill reviews have called on the minimum free float amount to be reduced, which will encourage startups to list in London, ensuring that the LSE becomes the most active stock exchange in Europe once again.

The City of London has expressed its reservations around the liberalisation of London’s stock market listings regime on the grounds of investor protection. This view negates one of key reasons as to why the UK is perfectly positioned for a shake-up of its listing rules: the UK’s rule of law.

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