The UK Listing Review has reached a key milestone with the publication of its report on 3 March 2021 setting out 15 detailed recommendations. Market participants should not expect any immediate change as for the most part regulatory change will be required if the recommendations are progressed as seems likely. The next step will see consultations being launched by the FCA (on the Listing Rules) and by HM Treasury (on the prospectus regime).
The Review was launched in November 2020. Our post contains the details and objectives: https://blog.burges-salmon.com/post/102gklt/closing-the-gap-with-nasdaq-new-uk-listing-review
Three recommendations are likely to gain particular attention. These are:
- allowing companies with dual class share structures to list in the premium listing segment
- reducing free float requirements to improve liquidity
- amending the Listing Rules (LR 5) which can require trading to be suspended in the shares of SPACs on announcement of a potential acquisition which constitutes a reverse takeover
The recommendation on SPACs is no great surprise. It reflects the significant disparity between SPAC listings in the US and in the UK and the emergence of Amsterdam as a potential centre for SPAC listings in Europe. The figures are stark. The review notes that 248 SPAC vehicles were listed in the US in 2020 raising the US$ equivalent of £63.5 billion. By contrast, four SPACs were listed in the UK in 2020, raising an aggregate total of £0.03bn.
Interestingly the Review also suggests that the standard listing segment is given a leg-up. The Review recommends "repositioning the current standard listing segment and promoting it far more effectively" although it will probably require more than a change of name to the Main Segment to achieve this. Whether there is market appetite for that remains to be seen given the attractions of AIM as a market for many growing companies.
The other recommendations include:
- an annual report from the Chancellor to Parliament on the state of the City and its competitive position
- changing the statutory objectives of the FCA
- reviewing the prospectus regime
- maintaining the existing regime within the Listing Rules for secondary and dual listing together with a replacement "passporting" regime
- facilitating the provision of forward-looking information by issuers in prospectuses, by amending the liability regime for issuers and their directors
- considering how technology can be used to improve retail investor involvement in corporate actions and their undertaking of an appropriate stewardship role
The political impetus behind the Review suggests that regulatory change is inevitable although the precise details will only emerge as the consultation process progresses. Whether SPACs will still be in vogue when the changes take effect is anyone's guess. In any event the Review is not the final word on listing - we anticipate that institutional investors will resist any dilution to the standards underpinning the premium listing segment.
Lord Hill, Chair of the Listing Review said: "The proposals we are announcing today are designed to encourage investment in UK businesses, support the development of innovative growth sectors such as tech and life sciences, benefit the companies who choose to float in London, simplify and streamline processes, encourage a more dynamic regulatory regime, and improve the UK’s competitive position, ultimately providing more opportunities for millions of investors to share in growth."