01.

What is The Main Market?

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.

02.

Background

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 climates. The Main Market has 2 forms of listing; a Premium Listing or a Standard Listing.

03.

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 shareholders at 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 exciting sectors

04.

Types of Main Market listing

Premium 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 Premium 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.

Standard Listing

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.

05.

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

06.

Fundraisings

Most flotations 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.

07.

Depositary Receipts

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.