The new rules aim to make London a more attractive listing venue for founder-led and other innovative IPO candidates.
By Chris Horton, James Inness, Anna Ngo, and Johannes Poon
On 2 December 2021, the UK Financial Conduct Authority (FCA) published a Policy Statement (PS21/22) confirming the following key changes to its listing rules that took effect from 3 December 2021:
- Limited form of dual class share structure permitted under the premium listing segment
Premium-listed issuers can now adopt a targeted and time-limited form of dual class share structure (DCSS) which would operate to prevent the removal of a director and deter takeovers during a five-year period following admission.
Listing of dual class share structures, which give certain owners (usually founders, employees, and pre-IPO investors) enhanced voting rights over other public shareholders, are increasingly common in the US markets as a strong pipeline of founder-driven tech companies goes public. The UK has now seen several dual class share structures, including most recently the £5.4 billion IPO of The Hut Group, which had a “special” share for the founder. With the UK government keen to increase the marketability of UK listings following Brexit, we anticipate that US dual class deal architecture is likely to be featured on a growing number of London listings — a development that could benefit PE firms and founder managers seeking to retain a greater governance role post-IPO.