IPO listings: How to start trading on LSE?

Highlights 

• LSE’s Main Market is the flagship market, regulated by the UK listing Authority.
• It has two main Financial Services Authority listing categories that are Premium and Standard.
• The Alternative Investment Market (AIM) is the market for smaller, growing companies and is an exchange regulated market.
• The regulatory requirement for listing in the main market may vary depending on the segment.

The London Stock Exchange (LSE), which was set up almost 300 years ago, is one of the most influential and oldest global financial centres, which offers a wide array of ways to UK and international companies to market their businesses. 

Depending on the different criteria such as size of the company, stage of development, eligibility, overall strategy and objectives, complexity of the offer and securities issued and investor who are being targeted the company may choose to get listed on the Main Market and Alternative Investment Market.

The Main Market is the flagship market, regulated by the UK listing Authority (UKLA). It has two main Financial Services Authority (FSA) listing categories that are Premium and Standard and has been designed to help clarify the regulatory standards.

The Alternative Investment Market (AIM) is the market for smaller, growing companies and is an exchange regulated market. The companies looking forward get listed on the AIM must appoint and retain a Nominated Adviser to guide them.  

Also read: Oxford Nanopore (ONT): What to expect after stellar listing?

Admission and disclosure standards

The regulatory requirement for listing in the main market may vary depending on the segment and requires a company to create a prospectus approved by the Financial Conduct Authority (FCA) to get admitted to trading. The FCA also assesses an issuer’s eligibility for admission to the official list and to ensure that its rules are met. The admission process involves reviewing and approving the prospectus or listing particulars, which is submitted by the issuer’s sponsor or key adviser to FCA. The prospectus primarily contains necessary information of the company and its operations in accordance with the disclosure requirements set out in the listing and prospectus rules. 

The FCA maintains a dialogue with the advisor of the company until the eligibility requirements are not fulfilled. The company also needs to apply to London Stock Exchange to get securities admitted and meet the disclosure and eligibility requirement of its Admission and disclosure standards.

The admission becomes effective when the relevant document gets approved by the FCA and the admission decision for securities to the official list and trading has been together announced by the LSE and FCA. Once the company gets successfully listed it has to regularly publish financial information and information that may affect its securities prices.  

Continuing Obligations

The principal initial and ongoing regulatory consideration for Main market listed businesses comprise the requirement of Financial Conduct Authority (FCA) and LSE’s Admission and Disclosure Standards that include further standards for non-listed markets such as the high Growth segment and include application rules for all businesses for further securities and corporate actions that must be complied with.

All the LSE-listed companies should comply with ongoing disclosure requirements such as the Transparency and the Market Abuse Regulation, which are executed via the Disclosure Guidance and Transparency Directive of the FCA in UK. In case the securities are quoted on the Official list then company needs to follow the ongoing disclosure obligations within listing rules. It ensures that the company always fulfills the eligibility requirements for admission to the Official list. The FCA monitors and ensure that companies meet the compliance with MAR, DTRs and the Listing Rules.

Also read: Alphawave (AWE): What led to 50% share price drop from IPO listing?

Super equivalent obligations

The company getting listed on the Premium segment means that it meets the LSE’s highest and most trusted world class standard of regulations globally that are based on super-equivalent requirements set out in the listing Rules of the FCA. The following codes apply to the premium-listed companies on an ongoing basis.

The UK Corporate Governance Code

The Premium-listed companies need to follow the codes laid down the Corporate Governance Code of UK and if they do not follow the codes they must provide explanation. Effective corporate governance helps the company achieve its strategic objectives and builds value in the business which ultimately delivers higher value to shareholders.

Class tests under the listing rules

For premium-listed companies’ shareholders, approval is needed under the listing rules to enter into a transaction outside its ordinary course of business and with certain related parties. These tests are used to determine the above-mentioned conditions.  

Accounting standards

Accounting standards are administrated by the International Accounting Standards Board and the Financial Reporting Council.

Pre-emption rights

Pre-emption rights offers company’s shareholders with the right to receive their pro rata share of any new shares issued for cash. The companies offer investors with security against dilution of their investments by subscribing to the pre-emption right regime.

The City Code on Takeovers and Mergers

The City Code on Takeover and mergers are designed primarily to ensure that shareholders are treated well and have opportunities to determine on the merits of takeovers and they are treated equally as other shareholders by an offeror.  The code also offers an orderly framework promote integrity of the financial market and conduct takeovers.

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