Benefits of dual listing in the UK22 July 2020

When is the right time for my company?

The timing of listing on a market is key to obtaining the greatest benefit possible; this is particularly true at times where markets are volatile.

Whilst it is never possible to time the market completely, stronger companies which are able to plan and implement listings during uncertain times have the opportunity of gaining heightened visibility and access to a larger degree of capital than they otherwise might in “normal” circumstances.

Alternatively, a listing effected by way of an introduction (without an accompanying capital raising) may be sought while markets are difficult and, by de-coupling the listing and fundraising, it can bring greater certainty to achieving the listing and provide a strong platform for a future capital raising event.

Another point to bear in mind is the strength of the home market. Whatever the state of the markets generally, a dual listing in London provides greater access to capital and a good hedge for any home market concerns.

What is the right market for my company?

It is important for a home-listed company to choose the right market for its current needs and future development strategies. The main reasons for choosing London include its global reach and reputation.  London offers companies access to major international funds, as well as also to unique sources of capital including UK-specific smaller company funds, special situation funds and private clients. This results in increased liquidity and access to funding sources, as well as greater acceptance of London-listed shares for acquisitions. London can also provide a useful hedge against volatility in local markets.

When deciding to join the London Stock Exchange (the “LSE”), companies will normally choose between the Main Market (Premium or Standard Segment) and AIM – see Figure 1 for a comparison of the key points to consider. Companies will also need to consider costs, levels of regulation, types of investors, and the right jurisdiction for their business.

The Main Market

The Main Market is one of the most well-known international capital markets. It usually attracts developed and larger companies. The Main Market is also synonymous with prestige and high media coverage which helps boost company profile.

A company will generally have a choice of a Premium Listing or a Standard Listing on the Main Market. A Premium Listing is only open to certain types of equity shares and has more stringent requirements, also known as the UK’s “super-equivalent rules”. A Premium Listing also provides potential access to the FTSE indices. A Standard Listing meets the EU’s harmonised minimum requirements and therefore tends to be the more popular route for companies wishing to achieve a dual listing, unless potential access to the FTSE indices is a short-term goal.

EU Regulation 2017/1129 (the “Prospectus Regulation”) gives issuers that are already listed on an EEA regulated market or multilateral trading facility the option of issuing an annual universal registration document (“URD”). Once this has been approved by the relevant competent authority for two consecutive years, the issuer is able to file further annual URDs without prior approval. Issuers that file an annual URD will also benefit from fast track prospectus approval in any member state in which they choose to list securities (of five, rather than ten, days). The URD therefore works as a form of “shelf” registration for issuers that may want to list securities on other EEA markets in the future. The Prospectus Regulation/URD rules will apply in the UK during the Brexit implementation period, currently expected to last until 31 December 2020 at 11:00pm. It is also anticipated that these harmonised rules will continue beyond the Brexit implementation date in some form, although that is not yet certain.

AIM

AIM was launched in 1995 to facilitate smaller and growing companies raising equity for growth, since then it has become the leading market for European growth capital. Over 3,000 companies from around the world have chosen AIM, from early stage companies to venture capital backed companies. AIM has attracted companies from major sectors such as oil & gas, mining & metals, technology, health care, telecommunications, and consumer services.

The AIM Designated Market Route (the “ADM Route”) is a streamlined route available to “quoted applicants” which have had their securities traded on an AIM Designated Market (“ADM”) for at least 18 months prior to admission to AIM. Current ADMs are the top tier markets of ASX, JSE, NASDAQ, NYSE, SIX Swiss Exchange, TMX Group, UKLA Official List and any EU Regulated Market or SME Growth Market as defined and registered under MiFIDII. Companies which have satisfied the eligibility criteria for listing on one of the ADMs are unlikely to find it difficult to comply with AIM listing requirements. Further, the ADM Route means that the quoted applicant will not be required to produce a full admission document, unless it wishes to for broader marketing reasons or falls within the scope of the Prospectus Rules. For many quoted applicants seeking a dual listing on AIM, there will therefore be a significant time and cost saving.