Navigating the UK’s stock markets - which market is best for your company?

In this article, Colin Wright of our capital markets team takes a closer look at each of the UK’s market
alternatives, explores what makes them different and how to determine which one could be right for
your company.

Being ‘listed’

When companies describe themselves as being ‘listed’ on their websites or marketing literature, they do not always make it clear which market they are listed on, let alone which segment of a market. In the UK there are the following routes to being a listed company:

• London Stock Exchange
• London Stock Exchange: Alternative Investment Market (AIM)
• Aquis Stock Exchange: Growth Market – Access Segment
• Aquis Stock Exchange: Growth Market – Apex Segment

Each of these alternatives is geared to different types of business, with different requirements both for listing and for ongoing compliance and regulation.

The London Stock Exchange’s Main Market’ previously had three different segments: Premium, Standard and High Growth Segment. The Premium segment was the highest listing standard in the UK. A Premium Listing was aimed at the largest leading companies on the London Stock Exchange (LSE) that are looking for a highly liquid market. To maintain a Premium Listing, companies had to meet and maintain the UK’s highest standards of corporate governance and comply with ongoing listing rules; with all of this incurring significant listing and ongoing costs in order to qualify and maintain a listing.

The Standard Listing was used for equity shares, Global Depositary Receipts (GDRs) and debt listings. A Standard Listing allowed issuers to access the LSE’s Main Market by meeting UK listing standards (reflected in the Listing Rules) only, rather than the UK higher requirements required for a Premium Listing.

The UK’s Financial Conduct Authority recently released the biggest changes to the UK listing regime in three decades to encourage companies to list on the UK’s stock market. The regulator wants to make it more “straightforward” for companies to list on the UK stock market and therefore to improve its number of IPOs and liquidity and returns to investors.

The rules came into force on 29 July 2024 and the simplified system will include just one category and
streamlined eligibility for those companies seeking to list their shares in the UK. This new regime is the conclusion of the reform journey that started with the Listing Review in 2021 and which modernises the listing framework while maintaining robust standards to protect investors and ensure market integrity. There are now four new listing categories:

Commercial companies equity shares

This is the flagship listing category for commercial companies seeking a UK share listing. It replaces the
previous Premium and Standard listing segments. 

International secondary listings

This category is for overseas incorporated companies with a secondary listing in the UK. This category largely replicates the previous standard listing segment.

Transition

This is for commercial companies previously on the Standard listing segment. This category is closed to new applicants unless they have already submitted a complete application for the standard listing segment to the FCA.

Shell companies

For shell companies and special purpose acquisition companies (SPACs), based on the previous standard listing segment. Navigating the UK’s stock markets - which market is best for your company? There will be a single set of listing principles for all categories. From 29 July 2024, existing issuers on the Premium and Standard listing segments will be automatically mapped to the relevant new listing categories, as follows:

• Premium listed commercial companies will be mapped to the Commercial Companies category.
• Standard listed commercial companies will be mapped to either the transition or international secondary listing category, depending on their nature.
• Shell companies/SPACs will be mapped to the shell companies category.

Commercial companies seeking a new LSE listing will have to apply to the Commercial Companies Equity Shares category as that replaces both the previous Premium and Standard listing segments. The listing criteria are less onerous than the previous Premium listing segment but more stringent than the previous Standard listing requirements.

AIM Market

The AIM market, owned and operated by the London Stock Exchange as a Recognised Investment Exchange, stands out as a Multilateral Trading Facility (MTF), rather than a Regulated Market.

The AIM market has been operating for more than 25 years and was developed to meet the needs of smaller, growing and emerging companies. It is the most popular choice as an alternative to joining the Main Market. AIM is not a Regulated Market, so companies are not required to comply with the full listing requirements of the FCA. It is focused on helping smaller, growing businesses raise capital to aid their growth and to raise the profile of companies with its investors, customers and other stakeholders. Whilst initially focused on meeting the needs of UK growth companies, AIM is also well known internationally, not just in terms of investors, but also the number of international companies on its market.

Rather than prescriptive entry criteria, for example on minimum size, trading history or free float, companies must instead demonstrate their readiness and suitability to join a public market. AIM can be seen, ultimately, as a stepping-stone to moving up to the Main market, although many companies remain on AIM for as long as they are public companies.

The AIM route offers smaller growing companies, from all countries and all sectors, all the benefits of being traded on a world-class public market within a regulatory environment designed specifically for them.

Companies whose shares are already traded on certain reputable markets around the world − known as ‘AIM Designated Markets’ − for at least 18 months may be eligible to use a simplified admission route to join AIM.

All companies on AIM must have a Nominated Advisor (‘Nomad’). The nominated adviser is a corporate finance firm that has been approved by the Exchange to undertake the role set out in the AIM Rules for Nominated Advisers.

The Nomad is responsible to the LSE both at admission and on an ongoing basis. These obligations include considering issues of appropriateness as well as providing advice and guidance to the AIM company on compliance with its AIM Rules obligations.  

The Nomad role does not substitute the AIM company’s primary obligation to comply with the AIM Rules and, accordingly, the role of the Nomad is to support but not guarantee compliance by the AIM company of its obligations.

Aquis Stock Exchange

An alternative to AIM is admission to the Aquis Stock Exchange Growth Market. The market generally has less liquidity and is harder to raise capital. It is, however, easier, cheaper and quicker to list on Aquis.

The Aquis Stock Exchange is a primary and secondary market for equity and debt securities in the UK. It is a Recognised Investment Exchange primarily for earlier stage companies that are not yet at a stage of development to list on the LSE.

Aquis operates two distinct primary markets, a Main Market and a Growth Market. The Aquis Main Market is a UK Regulated Market for securities admitted to the UK Official List. The Aquis Growth Market is designated for unlisted securities. It is a Multi-lateral Trading Facility (MTF). The Growth market is divided into two segments – Apex, which is geared to larger, more established companies and Access, which is tailored for smaller companies at an earlier stage in their development.

Aquis: Access

The Access segment is designed to be the first stage listing of being a publicly quoted company. The Access segment is aimed at early-stage companies with little or no trading history.

Aquis: Apex

The Apex segment is aimed at larger, more established growth companies. Apex companies have a proven growth strategy and are expected to have higher standards of corporate governance than companies on Access. Companies will need a market capitalisation of at least £10 million at admission and with at least 25% being in public hands. They will need to adopt the principles and standards set down in either the Quoted Companies Alliance’s corporate governance code or the UK Corporate Governance Code. A minimum trading history of at least two years is needed with audited accounts available for review.

More in our Capital Markets Outlook

This article is an excerpt from our Capital Markets Outlook. Read the full article here to explore the key distinctions between these markets and discover how to select the ideal one for your company.