LONDON, March 2 (Reuters) – The UK will “modernize” its listing rules to bring more high-growth and “blank check” SpaC companies to London, Treasury Secretary Rishi Sunak said Tuesday.
The London Stock Exchange faces tougher competition from NYSE and Nasdaq in New York and Euronext in Amsterdam as the UK left the European Union entirely on December 31st.
In order to keep London globally competitive after Brexit, Sunak commissioned a review of the exchange rules last November. It was chaired by former European Commissioner Jonathan Hill and will publish its recommendations on Wednesday.
“The review has more than delivered, and I am keen that we will act quickly on its recommendations and cement the UK’s reputation at the forefront of global financial services,” Sunak said in a statement.
The government is under pressure to act – it announced an accelerated work visa for fintechs last week – after much of the euro stock and swap trade left London for Amsterdam and New York following full Brexit in December.
However, asset managers and company directors warn against undermining corporate governance standards by relaxing the listing rules.
“The recommendations in this report are not about opening a gap between us and other global centers by suggesting radical new ways to try to gain a competitive advantage,” said Hill.
“It’s about filling a gap that has already opened. All recommendations are in line with existing practice in other well-regulated financial centers in the US, Asia and Europe, ”added Hill.
Two changes aim to bring London in line with New York and other financial centers by giving founders the ability to get their company public while still maintaining significant control.
As is well known, Hill recommends allowing two-tier stock structures to give directors and founders expanded voting rights on certain decisions, a move that, according to small investor groups, contradicts the “one share, one vote” principle. The minimum free float or the number of shares in a company or in public hands would be reduced from 25% to 15%.
Hill also recommends liberalizing the listing rules for special purpose vehicles, or SPACs, whose New York IPOs have spiked over the past year, with Amsterdam picking up some lately as well.
Hill recommended that the prospectus used by companies to set out their initial or second offering of shares should also be thoroughly reviewed.
In addition, an annual “situation report” from the finance minister to Parliament on the competitive position of the financial sector is to be submitted.
“The constant development of the UK listing regime is the key to flexibility for companies that want to be listed in London while maintaining high standards of corporate governance,” said David Schwimmer, CEO of the LSE Group (LSEG.L).
Reporting by Huw Jones; Adaptation by David Evans
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