High Growth Segment FAQs
What is the High Growth Segment?
The High Growth Segment (HGS) is a new segment of London Stock Exchange’s Main Market, launched in March 2013. It is a transitional segment designed to attract high growth, mid-sized UK and European companies aspiring to an Official Listing over time.
Why has London Stock Exchange introduced this new route to market?
There are a number of larger private UK (and European) businesses with ambitious growth plans that require external capital but find the barriers to accessing the IPO markets too high.
HGS has been designed to make the Main Market a more accessible and attractive source of capital for these businesses. It complements our existing offering of AIM and the Premium and Standard segments of the Main Market, providing additional choice to potential issuers.
What type of company would access the segment?
An HGS company would be larger than a typical AIM company and have aspirations to ultimately join the Premium segment of the Main Market.
It would have to meet the following eligibility criteria:
- Be incorporated in the EEA
- Be commercial companies, issuing equity shares only
- Have a minimum free float of 10 per cent at IPO
- Demonstrate historic revenue CAGR of 20 per cent over 3 years
What do I need to do in order to be admitted to HGS?
- Produce an EU Prospectus, approved by UK’s Financial Conduct Authority (FCA) or other EEA competent authority
- Appoint a Key Adviser, who plays a similar role to a Listing Sponsor, in relation to admission
- Demonstrate eligibility for the segment, as set out under the HGS rulebook, and compliance with the London Stock Exchange’s HGS rulebook and the Admission & Disclosure Standards
- Be approved for admission by London Stock Exchange’s Admissions Review Committee
What is the HGS’s regulatory status?
HGS has EU Regulated Market status and is therefore subject to EU directives as applicable to Regulated Markets (including the Prospectus Directive for admissions and Transparency Directive for continuing obligations). It is a segment of London Stock Exchange’s Main Market but does not form part of the FCA’s Official List and therefore is not subject to the UK Listing Rules.
Companies are required to comply with the London Stock Exchange’s High Growth Segment Rulebook and Admission and Disclosure Standards.
What is required for an HGS company to transition to Premium Listing?
A company transitioning from HGS to premium listing would remain on the same EU Regulated Market (the Main Market) but would need to apply for admission to the premium listing category of the Official List in accordance with Listing Rule 3. It would therefore have to meet the eligibility requirements for premium listed companies set out in the Listing Rules. An eligibility letter from a sponsor (setting out how the company satisfies Listing Rule 2 and Listing Rule 6) would also be required. A new prospectus may or may not be required, depending on the specific circumstances of the company. For example, if a company is undertaking a fundraising at the time of transition, the requirement to produce a prospectus may be triggered.
The HGS rules provide an exemption from seeking shareholder approval for cancellation from the segment where a concurrent application is made for admission to Premium.
We’re not based in the UK. Is that a problem if we want to be on HGS?
HGS is designed for EEA incorporated companies which allows for a simple framework and ensures that all issuers are subject to a consistent level of financial services and corporate law as provided for in the EEA directives.
Companies with assets, operations and management outside the EEA that demonstrate the growth characteristics required to be eligible for HGS may choose to re-incorporate in an EEA jurisdiction to seek admission to the segment. In any case, these companies will continue to have access to AIM and the Premium and Standard segments of the Main Market.
How does HGS differ from AIM?
HGS is for high growth businesses seeking access to the Main Market due to their size and stage of development but that at the point of IPO are not able to meet all the requirements for being on the FCA’s Official List.
HGS has EU Regulated Market status to ensure a framework appropriate for larger companies, whereas AIM is not an EU Regulated Market, to allow for a market framework suitable for smaller companies.
How does HGS differ from techMARK?
techMARK, introduced in 1999, is a grouping of Premium Main Market companies whose business models require a particularly high level of innovation and investment into research and development programmes. techMARK is an index classification to help Premium companies gain profile with the investor community whereas the HGS is a market segment with its own regulatory status and parameters.
What type of investors will be able to invest in the HGS?
The High Growth Segment will be open to institutional and retail investors seeking growth opportunities.
Could companies be included in indices, and therefore passive funds?
No. As HGS companies will not be listed within the Premium Segment of the Main Market – a key criteria for FTSE inclusion – they will not be included in the existing FTSE indices.
What on-going requirements do companies need to comply with?
- On-going requirements as set out in the HGS rulebook, including
- rules around significant transactions and website disclosure
- requirement to consult a Key Adviser to specific events such as notifiable transactions
- EU FSAP directives as applicable to Regulated Markets, including the Transparency Directive
- An annual statement of what corporate governance code has been adopted and to what extent
We will also retain a dialogue with issuers to understand when they meet the listing eligibility criteria to help them achieve the transition to the Official List.