1. Certificate for Introduction to Securities & Investment (Cert.ISI) Unit 1 Lesson 25:  Main requirements for listing on the London Stock Exchange  The role of the Alternative Investment Market (AIM) 25cis

2. Listing on the London Stock Exchange (LSE) In the UK, if a company wishes to list its shares on the London Stock Exchange (LSE), it must first obtain approval from the UK Listing Authority (UKLA)  The UKLA is a division of the Financial Services Authority (the FSA)

3. Listing on the LSE (cont.) The UKLA has set out a number of requirements for a company seeking to list on the LSE. These are designed to protect the investing public.  The company seeking a listing must be a public limited company (Plc)  The company’s expected market capitalisation must be at least £700,000  Market capitalisation is the share price multiplied by the number of shares in issue o Example: 1.5m shares in issue; share price 120p = market cap of £1.8m

4. Listing on the LSE (cont.) Other UKLA conditions for listing:  The company must have been trading for at least three years  At least 75% of its business must be supported by a historic revenue earning record for that period  A trading company must demonstrate that it has sufficient working capital for the next 12 months

5. Listing on the LSE (cont.) Other UKLA conditions for listing:  At least 25% of the company’s shares should be in public hands o r available for purchase by the public  The term “public” excludes: o Directors of the company o Associates of directors of the company o Significant shareholders who hold 5% or more of the company’s shares Once listed, companies are expected to comply with rules known as the “continuing obligations”  Must issue a report at a minimum frequency of half-yearly  Must notify the public of any new, price-sensitive information London Stock Exchange at Paternoster Square

6. LSE listing exercise Based solely on the information provided below, which of the following companies would NOT be eligible to list on the LSE? Company A: Langley Property Rentals Plc  Established five years ago  First rental properties acquired two years ago  100% of revenues from property rentals  Directors, associates and significant share-holders own 70% of the shares  Expected market cap £2m Company B: Kelsey Market Research Ltd  Established 10 years ago  Company has been trading profitably since 2 nd year of operation  85% of revenues from market research  Has sufficient working capital for 14 months of operations Company C: Eden Park IT Services Plc  Established four years ago  75% of revenues from IT services  Been trading profitably from company’s inception  Directors, associates and significant share-holders own 25% of the shares  Expected market cap £1m

7. LSE listing exercise Based solely on the information provided below, which of the following companies would NOT be eligible to list on the LSE? Company A: Langley Property Rentals Plc  Established five years ago  First rental properties acquired two years ago  100% of revenues from property rentals  Directors, associates and significant share-holders own 70% of the shares  Expected market cap £2m Company B: Kelsey Market Research Ltd  Established 10 years ago  Company has been trading profitably since 2 nd year of operation  85% of revenues from market research  Has sufficient working capital for 14 months of operations Company C: Eden Park IT Services Plc  Established four years ago  75% of revenues from IT services  Been trading profitably from company’s inception  Directors, associates and significant share-holders own 25% of the shares  Expected market cap £1m X X 

8. Smaller companies The LSE is reserved for large, well established companies. Listing on the LSE is referred to as a “full” listing  If companies are too small to meet the UKLA’s criteria for a full listing on the LSE, there are alternative sources of finance for expansion  Private equity  Venture capital  The Alternative Investment Market (AIM)

9. The AIM market AIM was established as a junior market for younger, smaller companies  Companies seeking a listing on AIM apply to the LSE – not the UKLA AIM listing The main differences in listing requirements are: Full LSE listing  No trading history required  The company could be newly established  Minimum of three years’ trading history  No minimum market capitalisation  Minimum market cap of £700,000  No requirement for a minimum portion of the shares to be held by the public  Minimum of 25% of the shares must be held by outside investors

10. Listing on AIM A company wanting to gain admission to AIM needs to appoint: The role of the NOMAD  Advise the directors of the company of their responsibilities  In complying with AIM rules  With regard to the content of the prospectus issued as part of the application for admission  A nominated adviser (a NOMAD)  A nominated broker The role of the nominated broker  Make a market in the company’s shares to facilitate trading  i.e provide a buy and sell price at all times  Provide up-to-date information about the company to interested parties  i.e. provide research reports and company presentations

11. Rules common to both LSE- and AIM-listed companies Certain rules apply to all UK-listed companies, whether listed on the LSE or on AIM Prompt release of price-sensitive information, such as:  The gain or loss of a major contract  The launch of any litigation against the company  The appointment or resignation of a member of senior management Regular release of financial information  Half-yearly (interim) reports  Including profit and loss figures  Full-year (final) reports  Including balance sheet