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Lord Hill Review pushes for dual class shares on the London Stock Exchange

Changes that will make the UK market more competitive for fintech?

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Big changes could be ahead for the London Stock Exchange (LSE) after Lord Hill’s review of the UK’s listings rules recommended changes to bring the market more in-line with the US.

Allowing dual class share structures on the LSE’s premium segment to give directors better voting rights, a reduction in the free float requirements in an IPO and a review of the prospectus requirements on companies were among Hill’s recommendations to the Government.

During the Budget yesterday, Chancellor Rishi Sunak said the FCA would be “consulting on his proposals very shortly” with Sunak earlier stating that he is keen to work on “cementing the UK’s reputation at the front of global financial services.”

The recommendations are just the latest push to ensure that the LSE remains competitive with the US markets, where so many startups and fintechs choose to IPO.

Previous attempts have included the launch of London’s Alternative Investment Market (AIM), a sub-market introduced in 1995, and the High Growth Segment of the main market, which has a smaller free float requirements but higher revenue growth requirements and was launched in 2013.

“This report and the Kalifa Review of UK Fintech published last week, provide recommendations that will cater to the changing dynamic of our listing and capital raising environment,” said Charlotte Crosswell, CEO of Innovate Finance.

“We have an incredible pipeline of companies who are scaling rapidly and we must respond accordingly to provide options for growth and patient capital in the private and public markets.”

“We are particularly encouraged by the call to update rules around free float requirements and dual class share structures, in order to attract founder-led and high growth companies to list in the UK,” she added.

One element missing from the Hill Review, and criticised by finnCap CEO and founder Sam Smith, was the absence of recommendations around improving the participation of retail investors.

“The technology already exists to run a retail offer as part of an accelerated fundraise with no delay to the issuance timeline or impact on pricing. For example, PrimaryBid (a finnCap investee company) has partnered with the London Stock Exchange to do precisely that,” said Smith.

“If the economy is to recover from the pandemic as quickly as possible, it will need to access the widest pool of capital available. That means the UK doing everything it can to attract both institutional and individual retail investors, not either-or.”

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