Going to market

Before choosing a market to list on, a company should investigate which market is the most suitable for listing on, and what it would like to achieve from the listing. Is the company looking for a more flexible and less regulated market, or are they looking to access one of the world’s leading markets for trading? As well as looking at the end goal, careful consideration should also be given to what legal requirements and obligations each option will entail and have the appropriate processes and procedures in place to be able to comply.

Here we look at a comparison of the AIM and Main Market requirements and obligations for a listing or flotation in London

When it comes to considering an initial public offering, companies must be aware of the key differences which may help to inform their decision about which is right for them. Factors such as its size and stage of development, the type of investors being targeted, eligibility and overall strategy and objectives can help inform this decision. Ultimately, which option is best for a particular company will depend on the individual characteristics of each business.

The Main Market

The LSE Market is an exchange where typically larger or more established companies are listed. UK and overseas companies can access the LSE market, comprised of high-growth, premium-listed and standard-listed companies.

Admission to the LSE premium market requires companies to meet the UK’s Listing Rules. These are more onerous than the minimum requirements of the EU, which must be met for a standard listing. If a company is not yet ready to gain admission to AIM, they may find a standard listing a suitable alternative first step on their way towards obtaining a premium listing.

AIM

AIM, launched in 1995,  provides an opportunity for small and medium companies worldwide to raise capital for their growth and innovation potential. AIM was created for smaller companies that could not meet the criteria for listing on the Main Market and it offers greater flexibility in terms of regulation.

Entry requirements

When choosing their market, it is important that companies understand the key differences.

Float size

The float is the total number of shares available for public investors to buy and sell. In December 2021, the Listing Rules were changed to reduce the number of shares available for public investors. For companies listed on the Main Market, this was reduced from 25% to 10% to lower potential barriers for issuers. For AIM companies, the decision will be made as part of the assessment of appropriateness carried out by the nominated advisor (nomad).

Market cap

The market cap of a publicly traded company is the total value of its ordinary shares that are owned by the shareholders. Companies with a premium or standard listing must have a market cap of at least £30 million according to the updated Listing Rules. AIM does not have this requirement.

Advisor

A company listing on AIM must always have a nomad appointed.  However, companies listed on the Main Market do not need to appoint an advisor. If a company is listed on the premium market, then an appointed listing sponsor is required for admission and any transitions made thereafter.

Revenue criteria

For AIM and Main Market listings, there are no revenue criteria. An applicant must have published or filed historical financial information that covers a minimum of three years and represents at least 75% of the applicant’s revenue earnings during that period.

Listing considerations

When a company is listed on AIM, it will need to provide an admission document that is published by the company that is intending to admit its securities to trading on AIM in accordance with the AIM rules. The company will also need a nomad declaration of suitability.

To list on the premium Main Market, a company must produce a prospectus and an eligibility letter to the FCA under the Listing Rules. The prospectus will allow an investor to make an informed assessment of:

• the assets and liabilities, profits and losses, financial position and prospects of the issuer and of any guarantor
• the rights attached to the securities
• the reasons for the issuance and its impact on the issuer

Once a company has been listed on a chosen market, it must abide by the legal and regulatory requirements set out by the FCA.  Companies that are listed on AIM are regulated by the LSE, with the company’s nomad being responsible for providing confirmation to the LSE of compliance with certain rules.

Ongoing obligations

Companies listed on AIM  are required to comply with the AIM rules published by the LSE, as well as adhere to certain standards and regulations such as the MAR, the DTR, the Prospectus Regulation and the Prospectus Rules.

AIM companies must also file their annual financial report and accounts within six months of the company’s year-end date and the half-year financials within three months of the end of the half-year period.

Companies listed on the Main Market have the responsibility to abide by the DTR and publish their annual financial reports and accounts within four months of their year-end date, as well as their half-year financials within two months. Premium listed entities must comply with Listing Rule 9.8 for their annual report. This includes a new listing rule introduced by the FCA which is designed to enhance climate-related financial disclosures and is effective for accounting periods beginning on or after 1 January 2021. It is important for all companies listed on the AIM and Main Market to ensure that the public is informed of regulated information by way of RNS announcements as required by the DTR, UK MAR and the Listing Rules. This includes the publication of results, share transactions of PDMRs, any change in directors, name or accounting reference date, buyback of shares, and net asset value announcements for investment trusts.

Corporate governance

AIM companies are required to comply with market practice and guidance from the nomad. In accordance with AIM rule 26, companies are expected to disclose on their website the details of which corporate governance code has been applied, how it complies with the code and any sections of the code it has chosen not to follow.  It is important to note that there is no definitive list of recognised codes for CGIUKI. However, the UKCGC and QCA codes are recommended as a starting point.

Main Market companies will be able to establish their corporate governance framework in accordance with the Companies Act 2006, the DTRs and the Listing Rules. For those companies on the premium Main Market, the Listing Rules require them to outline how they have implemented the core principles of the UKCGC to confirm where it complies with the code and explain where it does not.