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Choosing a market when floating your company

Benefits of flotation

A company may decide to expand its business by listing its shares on a stock exchange or other public investment exchange. Floating on the markets can benefit a company in different ways:

by raising finance through the offer of securities to the public for the first time – an initial public offering, or IPO;
by giving existing investors the opportunity to access a liquid market in which they can realise their investment in a company;
the ability to trade on an investment exchange can also increase the impact and value of a company's employee share ownership schemes; and
the profile of the company is raised – not just with the general public but also more specifically with customers and suppliers in terms of the company's perceived financial reliability.

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Which UK market?

Within the UK, there are three principal markets:-

the Official List of the London Stock Exchange (the "Official List");
Alternative Investment Market ("AIM"); and
OFEX.

When choosing a UK market, a company may well consider the following issues:

whether the market and its particular profile is relevant to a company's business;
comparison of the markets' admission requirements;
calculating the ongoing costs of maintaining a listing; and
determining the public disclosure requirements.

London Stock Exchange

The London Stock Exchange allows companies to raise capital from its two markets: (1) the Official List (or main market) and (2) AIM.

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1. The Official List conditions for listing

The listing of securities on the Official List is subject to the UK Listing Authority's (UKLA) Listing Rules and the London Stock Exchange's own Admission and Disclosure Standards. Amongst other stringent requirements, the two key requirements from a company before admission are three years' unqualified audited accounts and a three year trading record.

Chapter 25: For those young, innovative, high growth companies that cannot meet the requirement for a three year trading record, Chapter 25 of the Listing Rules allows the UKLA some flexibility in admitting such companies onto the Official List provided that it is satisfied that such an admission is desirable in the interests of the company and investors and also that investors will have the necessary information available to arrive at an informed judgement concerning the company and the securities for which listing is sought by the company.

techMARK: The techMARK index cuts across industrial sectors, location and size bands in order to bring innovative technology companies together. techMARK is not a separate trading platform, it is simply a market within a market.

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2. AIM

This market was established by the London Stock Exchange in order to meet the needs of young and growing companies which might not meet all of the requirements (with regard to trading record, established management team or minimum market capitalisation) for admittance onto the Official List.

AIM operates and is regulated separately from the Official List. AIM companies are not bound by the Listing Rules and benefit from a regulatory regime designed specifically for smaller companies.

OFEX

An independent public market specialising in smaller companies. OFEX has its own unique regulatory framework and endeavours to attract those companies who do not wish to incur the expense of joining AIM.

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Which country?

For some companies, the following factors can influence a decision to list on a market outwith the UK:

For those companies with a high profile abroad (or simply seeking such a profile), listing in another jurisdiction may well be more appropriate; or
At times, the UK markets may not be especially strong and/or listing in another jurisdiction may create more demand in a company from outside investors.

Examples of international markets

NASDAQ

NASDAQ stands for the National Association of Securities Dealers Automated Quotation System. This US market has two tiers: NASDAQ National Market and NASDAQ SmallCap Market. Each market has its own set of financial requirements that a company must meet to list its securities.

Euronext

Euronext was created by the merger of the Paris, Amsterdam and Brussels exchanges and (when measuring the value of the trading through its central order book) is the largest cash securities market in Europe.