LONDON (Nov 19): Britain's finance ministry said on Thursday that a former financial services commissioner for the European Union will review listing rules to make London more attractive for tech companies, triggering shareholder warnings of a financial "wild west".
Jonathan Hill will look at free floats and dual class share structures, the finance ministry said, as Britain reviews its rules to ensure London can compete with New York and Asia, as it loses unfettered access to the EU, its biggest customer.
Firms listed on the London Stock Exchange must currently have a minimum 25% of their shares available for trading, but some tech entrepreneurs are keen to maintain control of their companies and deter hostile takeovers by having a lower free float.
Dual class share structures, common in the United States but restricted for top listed UK companies, allow some shares more voting rights than others.
Shareholder groups oppose dual class shares, saying that "one share, one vote" ensures better standards of corporate governance and protects minority shareholders.
"More dynamic equity markets will enhance the UK’s position as a world-leading financial centre, and drive growth and innovation across the wider economy," Britain's finance minister Rishi Sunak said in a statement.
UK Shareholders, which represents retail investors, said dual class shares could open the door to riskier investments that shareholders may not understand.
"We don't want listing standards which encourage a slide to the financial wild west," said Dean Buckner, policy director at UK Shareholders.
The Investment Association, which represents asset managers, said more could be done to encourage small companies to list.
There are 1,100 companies listed on the London Stock Exchange, with a market capitalisation of three trillion pounds, making it one of the world's deepest capital markets.
Listings competition is intense, as highlighted by London and New York battling each other when Saudi oil company Aramco was considering an overseas float.
British electric van startup Arrival said on Wednesday that it is merging with CIIG Corp to get a US listing.
Faced with such competition, the London Stock Exchange, the government and banking officials have launched a charm offensive to persuade British online food delivery business Deliveroo to list in London, sources have told Reuters.
Hill's review will make recommendations to the government and the Financial Conduct Authority early next year.
Gavin Rochussen, chief executive of Polar Capital asset manager, said there has been a big trend of companies opting to raise capital privately, rather than through a public listing.
"That has, I think, got to do with the listing rules, the disclosure rules and so on... So I do think it needs addressing," Rochussen said.
Hill will also look at requirements on companies drawing up a prospectus for investors, review existing rules for secondary listings, and rules that require companies to provide a "track record" of their financial performance.