A New Bourse of Action: London Stock Exchange partners with Floww

April 5, 2022

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2 min read

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What's going on here?

The London Stock Exchange (LSE) has announced plans to set up a new exchange for private companies as well as listed ones.

What does this mean?

On Tuesday 15 March the LSE announced a new bourse in partnership with the fintech company Floww. A bourse is a market organised for the purpose of buying and selling securities, commodities, options and other investments – often used interchangeably with the term “exchange”. Floww runs a database for private firms and venture capitalists (VCs), boasting 7000 firms and over 70 VCs already on its platform. The LSE’s plan is to turn the database into a platform where firms can sell off their equity stakes (the part of a company that a person or organisation owns, represented by the number of shares they have) to VCs in order to secure funding.

There will also be a secondary marketplace where these shares can be traded by investors. This move will make the LSE the first global exchange to straddle both public and private markets. The new partnership comes after collaboration between the Government and the LSE to push through a series of reforms designed to tempt more firms to come to market in London.

What's the big picture effect?

The recently announced plans have been seen as a way to transform capital markets and revive the LSE’s fortunes. Last year it was reported that London hosted around 4% of global IPOs. This is a dramatic drop from the 20% hosted by London in 2005. The new bourse is therefore seen as a way for the LSE to update and boost activity. The private asset market (where you can invest in shares and buy debt of non-listed companies) has reportedly ballooned to over £5 trillion but the traditional infrastructure of the LSE has struggled to keep up. A modernisation of the LSE is therefore welcomed. This will allow the LSE to remain competitive with platforms that allow investors to trade shares of unlisted companies such as UK-based crowdfunding sites like Seedrs and Crowdcube. The “first of its kind” market that encompasses both private and public markets will help start-ups attract more investors whilst also bringing more IPOs to London by attracting unlisted businesses to the LSE.

Murray Roos (Head of Capital Markets at the LSE’s parent firm) has stated that this partnership will allow private companies to gain investment through a standardised exchange and has emphasised the importance of exchanges that are “indifferent” as to whether a firm is public or private. Unlisted firms have recently remained private for significantly longer than usual due to extensive reporting requirements. An “indifferent” exchange will therefore allow such companies to gain investment through means other than VCs. The LSE’s Head of Private Markets, Umerah Akram, has stated that this move will aid efficiency within private markets, further encouraging investment. This will support UK innovation by benefiting the tech industry which is renowned for its growing number of startups.

This innovative move by the LSE will hopefully give the old-fashioned institution a much needed makeover and reflect a better understanding of the new economy by encouraging non-traditional investing.

Report written by Nell Pringle

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