The Main Market is the largest stock market in the UK by value of the companies listed. The market is owned and operated by the London Stock Exchange, and is a stock market with an international pedigree.
When companies join The Main Market, they benefit by becoming constituents of one of the FTSE UK Index Series. This helps to build greater liquidity in the market by providing investors with clear and independent benchmarking of stocks, sectors and the market as a whole. The FTSE 100, FTSE 250, FTSE Small Cap and FTSE All-Share indices, account for almost £50 billion of investment in The Main Market, over 60 per cent of which is held in tracker funds.
’Companies from over 50 different countries, are listed on the market; some of these are the largest and best known companies globally.
The London Stock Exchange’s Main Market can trace its roots to the coffee houses of London back in the17th century. Over the centuries it has developed into one of the world’s most important stock markets, offering companies in the UK, and around the world, the opportunity to raise significant development capital even in the most challenging financial climate. The Main Market has 2 forms of listing; a Premium Listing or a Standard Listing.
The most active international equity market in the world, The Main Market has companies from more than 40 different business sectors, including retail, technology, manufacturing, support services and finance. The Main Market has developed specialist sectors for both technology companies (techMark), and for companies involved in healthcare (techMARK Mediscience).
The High Growth Segment
The High Growth Segment (HGS) is a new segment of the Main Market, designed for mid-sized European and UK companies .The sector is designed to appeal to European trading businesses that can demonstrate growth in revenues and that have longer term goals to join the Premium segment of The Main Market.
Specific eligibility criteria include:
- incorporation in an EEA state
- available to equity shares only
- companies need to demonstrate historic revenue growth of 20% over a 3 year period
- minimum free float of 10% with a value of at least £30 million (majority of the £30 million must be raised at admission)
- a Key Adviser must be retained at admission and for specific matters including notifiable transactions
HGS has EU Regulated Market status, but sits outside the UK’s Listing Regime. HGS companies are therefore be subject to London Stock Exchange’s HGS Rulebook and existing Admission and Disclosure Standards. In addition, as a Regulated Market under the EU FSAP the relevant directives (including the Prospectus directive, Transparency directive and the Market Abuse directive) apply.
Unlike AIM, The Main Market also attracts many investment companies. These offer investors access to portfolios of securities which are managed by professional investors.
Types of Investment Company listed on The Main Market include:
- Investment Trusts
- Venture Capital Trusts (VCTs)
- Real Estate Investment Trusts (REITs)
- Exchange Traded Funds (ETFs)
The benefits of The Main Market for companies
- The Main Market provides access to capital for growth, enabling companies to raise substantial tranches of investment capital at the time of flotation and subsequently though further fundraisings
- The Main Market creates a vibrant market for a company’s shares and enables them to broaden their shareholder base
- Companies benefit from an enhanced valuation and an objective market value on the company’s business is enabled
- Flotation on The Main Market provides a mechanism to introduce share based incentive schemes, helping to recruit, motive and retain staff
- The Main Market is a globally recognised stock market and companies listed on the market can benefit from a considerable heightened profile
- Companies that float on The Main Market benefit from access to deep pools of institutional investment funds. Large institutional investors provide the majority of investment funding and there are over 5,000 pension, insurance and investment funds in the UK that use The Main Market as a conduit to invest in listed companies
- Flotation on The Main Market may provide an exit route for your existing shareholdersat the time of the flotation, or subsequently
- When joining the London Stock Exchanges Main Market a company joins an elite set of indices. The indices which are used to compare a company’s performance against its peers also help to focus investors attention on particular sectors
- The Main Market is the only market that provides companies who operate in the technology or healthcare sectors with the benefit of inclusion in specially dedicated segments. techMARK and techMARK Mediscience are segments of The Main Market which are designed to provide investors in The Main Market with clear identification of companies operating in these exiting sectors
The Drawbacks of the Main Market
- The entry criteria for companies are tighter than for other smaller growth stock markets such as AIM
- Companies, along with their advisors, are required to prepare a prospectus
- Corporate governance requirements may be more onerous than for other smaller stock markets such as AIM
Types of Main Market listing
A Premium Listing means that a company must meet standards that are over and above (often described as ‘super-equivalent’) those set forth in the EU legislation, including the UK’s corporate governance code
By meeting the higher standards of a Premier Listing, companies benefit from having access to a great spread of investors. They may also benefit from the higher profile a Premium Listing brings, which in turn may lead to lower costs involved in fundraisings and enhanced valuation multiples
Companies that decide to join The Main Market via a Premium Listing have the opportunity to be included in the FTSE UK series of indices; these include the FTSE 100, FTSE 250 and FTSE, Small Cap indices
To achieve a standard listing a company has only to meet the requirements set by EU legislation. In terms of overall regulation and compliance, this is more relaxed than a Premium Listing for both admission criteria to the market and also for on-going obligations.
Standard Listings cover Depositary Receipts (‘DRs’) as well as a range of other securities, including fixed-income. Overseas companies are more likely to favour a Standard Listing and issue Depositary Receipts.
Preparing for The Main Market
Pre-IPO preparation is often the key to a successful flotation and fundraising. Begin the process with a feasibility exercise before preparations for flotation commence in earnest and certainly prior to engaging teams of Brokers, Lawyers and Accountants.
Initial areas to consider are;
- The strength of the company’s management team and its ability to deliver the company’s growth strategy
- The financial performance of the company and its growth potential
- The company’s competitive position and barriers to entry for the sector
- The amount of funding required by the company and when this is required
- The most effective use of new funding into the company and the financial impact this will have on profitability
Most flotation’s take place with a simultaneous offering of the company’s shares to investors. This may raise additional capital for the company by issuing new shares in a company to new and existing shareholders
This could also include existing shareholders selling their shares to new or other existing shareholders, in such circumstances additional capital is raised for the business (a secondary offering), or in some cases a combination of both
Joining The Main Market inevitably means that the company will need to satisfy certain corporate governance requirements. The principles of corporate governance are set out in the UK Corporate Governance Code and a company has to either comply with its principles, or, explain why it has not
Eligibility for joining the Main Market
The UKLA eligibility requirements include the following ;
- The shares must be admitted to trading on a recognised Investment Exchange, such as the London Stock Exchange
- A minimum market capitalisation of a company is £700,000
- At least 25 per cent of the entire class of shares must be put on the market and be ‘free-float’
Key eligibility requirements for a Premium Listing
- A company seeking a Premium Listing must have published or filed accounts for at least the last three full financial years
- The most recent set must be for a period ended not more than six months prior to the date of the prospectus
- At least 75 per cent of the business must be supported by a revenue-earning record of at least three years
- A company must demonstrate that it has sufficient working capital for at least 12 months following the flotation
- The total of all issued warrants and options to subscribe for equity share capital of the company must not exceed 20 per cent of its issued share capital
- A company must have controlled the majority of its assets for at least 3 years for which accounts are required
- A prospectus must be published by a company before its securities can be listed and admitted to trading on The Main Market
The Prospectus is the key document issued by the company and its advisors. It contains important information about the company and its operations, which include;
- The history of the company
- The risks associated with the company and its operations
- Details about the company’s strategy
- Projections and its trading prospects
- Financial information
Depositary receipts are issued by a depositary bank which repackages shares in a company. They can be listed and traded on The Main Market and are usually listed by Non UK companies. By listing Depositary Receipts on the London Stock Exchange’s Main market, companies benefit from exposure to a broader range of stock market investors. This usually runs in parallel with having a listing on the company’s own domestic Stock Market.
From an investor’s perspective, Depositary Receipts offer a means of investing in non-EU companies without the inconvenience of investing directly in the underlying shares.
Transferring a company from AIM to The Main Market
It is possible for companies to transfer from AIM to The Main Market subject to them meeting the eligibility criteria.