Tech Sector Welcomes London Stock Exchange High Growth Segment

Tech leaders have welcomed proposals for a new segment of  The London Stock Exchange which would allow high growth companies to get backing before a full flotation.

The LSE has asked for views on a a new main market segment in a draft rulebook – and early responses seem to be positive, although some people express doubt about the role of stock markets as investors for companies with long-term plans.

London Stock Exchange wants high growth stock

“London is the digital capital of Europe, home to a new generation of entrepreneurs and business builders who aren’t waiting for the economy to bounce back, they are taking control of their own destiny and charting their own path to success,” said Joanna Shields (pictured) CEO, of the Tech City Investment Organisation, and a UK Government digital ambassador.

“Today’s announcement will help them write their next funding chapter here in London,” she said.

The segment is launching in March and is intended for fast-growing companies, many of whom will be tech startups, as a first step towards getting on the “premium” segment of the UK Listing Authority’s Official List.

Current equity market arrangements aren’t good enough for ambitious UK and European businesses, the Stock Exchange release says: “This segment is part of the solution – it will provide greater choice for companies seeking capital and investors seeking growth opportunities.

Companies will be eligible for the new segment if they have a three-year record of CAGR growth of 20 percent or more, are incorporated in the European Economic Area, publish an approved prospectus and provide a minimum free float of ten percent of the company

“Ensuring that the UK’s fastest growing and most dynamic companies have access to equity capital is a priority for London Stock Exchange,” said Alexander Justham, CEO of London Stock Exchange. “The High Growth Segment will provide an additional attractive choice, giving these companies a launch pad for further success.”

The move was also welcomed by Greg Clark, financial secretary to the Treasury: “High growth companies are a key driver of job creation, and these companies will be vital to delivering the recovery. 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.”

Some observers are less keen on going public, however: Michael Dell is keen to take Dell off the stock market in the hope that private investors will be more patient and give him time to build the company into a bigger enterprise player. At this week’s Intellact Annoual Cobalt Conference 2013 – a technology financing conference in London, run by Intellect.

“I don’t understand the obsessions with reaching an IPO,” a technology financing manager who did not want to be named told TechWeekEurope at the event. “Private financing means you do not have to publish revenue figures and are not at the beck and call of the stock market.”

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