The UK Government is reportedly exploring making changes to IPO listing rules in order to make the UK more attractive to startups.
The Financial Times reported that Downing Street was in talks with those from the investment sector on how to attract companies following the UK’s exit from the EU.
This is designed to encourage tech startups to have their IPOs in London rather than elsewhere, providing a boost for the city.
According to the Financial Times, the financial services business council, established under Theresa May’s government made recommendations about changing IPO listing rules earlier this year.
In order for a company to be listed on a particular stock exchange, it must comply with the exchanges requirements. By re-thinking some of these rules, it may be easier to attract certain companies or make it easier for them to list on the London Stock Exchange.
IPO changes to benefit tech startups
Peter Rossi, Founder & Strategy Director at Equals Collective believes that this could benefit tech startups:
“This is really positive news as an IPO for many technology start-ups is a double-edged sword. It’s a lofty ambition to be able to float a business on a stock exchange, but for many the costs associated with it and the scale they need to get their business to are not feasible. So if these were areas where they would look to make the option more attainable it would be attractive.
“For example, the main benefit that is being taken seriously, is the reduction in the statutory reporting requirements. Very few business owners realise the true toll that quarterly finance reporting to the market takes on their company. When previously, they’ve had a whole 12 months to ride the seasonal customer waves and economic issues, they’re now measured by how they do every three months. This can have devastating effects on their share price, but also much more catastrophic effects on the culture of the business that they have spent many years building…. the quarterly sales pressure is very real! This is why we’ve seen a number of businesses taken back into private ownership over the years, including Dell and Virgin, allowing them to work on their strategy without the constant questioning from the markets.”
However, Russ Shaw, Founder, Tech London Advocates & Global Tech Advocates believes that as well as attracting talent from overseas, it is also important to support British startups:
“As British tech scale-ups such as Revolut and Darktrace continue to raise later and later private funding rounds, we need to look carefully at how our public markets support tech companies as a means of accelerating growth. Attracting overseas companies to the UK is important, but for our tech sector to remain diverse and strong after Brexit, it is equally crucial that we create an environment that incentivises British companies to grow and list here.
“I would caution that adapting listing rules is but one part of a bigger ecosystem equation that supports scale-ups and more mature tech companies. When looking to the UK as a viable growth market, digital businesses will also be assessing access to skilled workers, the broader regulatory framework and the health of the start-up ecosystem to support strategic acquisitions. We must take the rounded view and ensure the private and public sectors are working closely as we leave the EU to create these prosperous conditions.”