City investors warn over listings reforms in push to lure tech giants

The London stock market's premium listings segment must retain a "one-share, one-vote" structure to maintain shareholder protections, the UK's most influential investor body is to warn amid a push to make Britain a more attractive destination for multinational tech companies.

Sky News has learnt that the Investment Association (IA), whose members collectively manage £8.5trn in assets, will argue that the City watchdog should consider "rebranding" the London Stock Exchange's 'standard' listing category to remove any reputational disincentive for companies to use it.

The IA will also demand that any reduction in the 25% free float requirement for listed companies to 20% moves to the higher threshold over a three-year period, according to insiders.

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One source familiar with the investor group's proposals said it would also call for an acceleration of the initial public offering (IPO) process by more effective use of digital technology.

The IA's recommendations will be submitted this week to a review led by Lord Hill, the former EU financial services commissioner and current Treasury non-executive director.

In recent weeks, Boris Johnson and Rishi Sunak have spoken of their desire to make the UK the most attractive place in the world to float, sparking concerns among some institutional investors about the potential compromises on corporate governance that may be necessary to achieve that status.

The IA's warnings about wholesale reforms aimed at luring fast-growing companies are likely to be closely heeded by Lord Hill's review given the influential voices of its members, which include the likes of Blackrock, Fidelity and Legal & General Investment Management.

The source familiar with the IA's submission said it would argue against measures to encourage Dual Class Share Structures on the basis that THG Holdings - the parent company of The Hut Group - had listed last autumn with a golden share arrangement for its founder, Matthew Moulding, already in place.

"We don't believe that dual-class shares should be allowed anywhere near the premium segment of the London market," said one investor who has contributed to the IA's submission.

Watchdogs should also focus on raising corporate governance standards in privately owned companies, rather than lowering standards for listed businesses, the IA is expected to say.

In addition, they should examine reforms aimed at encouraging special purpose acquisition companies (SPACs) to list in London following the wave of such vehicles which raised tens of billions of dollars in the US public markets to pursue acquisitions last year.

Any such move would, however, require adequate protections for investors, such as enabling shareholders to vote on assets being purchased by a SPAC "and a mechanism to exit the investment if an appropriate acquisition is not found by the management team or it is not supported by the individual investor", according to a source familiar with the IA's recommendations.

Lord Hill's review is, ironically, being conducted against a backdrop of arguably London's strongest-ever pipeline of technology company listings, with Darktrace, Deliveroo and TransferWise among the British 'unicorns' drawing up plans to go public.

Nevertheless, London continues to lag far behind New York's exchanges in terms of the volume of tech companies listing and the scale of fundraisings unveiled there.

One obstacle to fast-growing companies listing on the London market may be the perceived distinction between its premium and standard categories, which have varying corporate governance standards, according to investors.

"The IA is essentially saying that they should be rebranded to remove any disincentive to use the standard listing," said one.

Lord Hill's review is expected to focus particularly on the questions of free float requirements and dual-class share structures.

The City of London Corporation recently called for reforms to make the UK listings regime more competitive.

"[The government should] conduct a regulatory review of equity listing structures to ensure the UK's competitiveness relative to other listing locations," the Corporation said last autumn.

"The goal should be to motivate equity listings in London, including within the tech sector where competition is particularly fierce, while maintaining high corporate governance standards."

The IA declined to comment on Monday.