The London Stock Exchange is looking at a ‘hybrid’ trading model to give private companies a stepping stone into the market: report

A reception desk at the London Stock Exchange on August 29, 2019 in London, England
A reception desk at the London Stock Exchange on August 29, 2019 in London, England

  • The London Stock Exchange will be the first exchange to give private companies access to trading shares in the public markets.

  • The proposals are part of a plan to attract more tech companies, according to a report from the Wall Street Journal.

  • Startups as well as large companies will be able to sell shares to individual and institutional investors under this model.

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The London Stock Exchange Group has proposed a private market for private companies to trade shares on public markets, according to a report from the Wall Street Journal.

This is part of a plan to attract more tech companies to London after Brexit. Technology startups, as well as large companies, will be able to sell shares to individual and institutional investors. LSE reported that fintech companies such as Revolut and Klarna that could have benefited from these proposals.

The proposals would give private companies access to public markets on certain stock trading days. Private companies will be able to trade shares publicly between one and five days in each trading window, once a month or quarter, or every six months according to the report.

Private companies will be able to conduct private equity transactions during those public trading periods, as well as share inside information with stakeholders without disclosing it publicly.

The London Stock Exchange said that before public trading periods, private companies will need to file a “clearance statement” that discloses material information.

“The new type of venue will serve as a stepping stone between fully private and public markets,” LSE wrote in a document sent to the FCA and the Treasury, according to the Wall Street Journal.

These private companies will not face the level of regulatory oversight that fully listed companies face.

LSE named the plan “MTF-lite”, after an industrial name for a financial market known as a Multilateral Trading Facility.

In a statement to Business Insider, an LSE spokesperson said, “LSEG works closely with government, regulators and stakeholders on a wide range of issues.”

“LSEG agrees that there is potential for additional ways to market to support the largest group of companies throughout the funding lifecycle including helping them transition from private to public markets and indeed back again. We will continue to support innovation in the UK as the global financial centre.”

The UK is trying to maintain its position as a global financial center after its full exit from the European Union in January 2020. The UK revised its stock listing rules last year to attract more tech companies and SPACs to London.

2021 was a strong year for initial public offerings in the UK, according to the LSE. The group said more than 120 companies are listed on the London Stock Exchange and have raised 16.8 billion pounds. It added that this was the strongest year in raising capital for an initial public offering since 2007 and the largest number of IPOs since 2014.

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