Several large companies are exploring possible IPOs in London, including mining giant Anglo American Platinum Ltd., Hong Kong conglomerate CK Infrastructure Holdings Ltd. and Chinese fast-fashion giant Shein. The high level of interest suggests that the UK stock market may be recovering after many years of doldrums. The new Labour government’s efforts to channel more money from UK pension funds into local stocks may help. But the market is still much smaller than it was before the 2008 global financial crisis, and the recent retreat by investors from European stocks has hit London harder than other European markets.
What’s in the pipeline?
- Shein Confidential filed The company filed papers with British authorities in June for a possible initial public offering in London, according to people familiar with the matter. Analysts said the prospects for such an IPO were uncertain and it would be controversial because Issue about the ethics and sustainability of Shein’s business model. The company, which could be worth around £50 billion ($64 billion), was founded in China, but is based in Singapore.
- The French media and communications group Vivendi SE plans list its broadcasting business Canal+ in London as part of a company split.
- Amplats has announced that it is exploring a secondary listing in the UK following its demerger from Anglo American Plc.
- Billionaire Victor Li’s CK Infrastructure is considering a secondary listing on a foreign stock exchange such as London.
- Local companies such as Lloyd’s of London insurer Canopius Group have begun preparing IPOs in the British capital for 2025.
What went wrong on the London Stock Exchange?
London’s reputation as a stock exchange for international companies has suffered as several companies – including CRH Plc and Flutter Entertainment Plc — have decided to move their main listings to New York. Even London’s largest inter-dealer broker, TP ICAP Group Plc, is looking to the US as it taken into account an IPO of a lucrative data company. A particularly hard blow was that London failed to attract one of the most promising British technology companies – chip designer Arm Holdings Plc from Cambridge, England. Despite Lobbying from government ministers and an offer to relax UK listing rules, Arm’s Japanese parent company, SoftBank Group Corp., chose New York as the location for its return to the stock exchange.
How bad is the downturn on the London Stock Exchange?
Activity has fallen dramatically since its pre-financial crisis peak. Average daily trading volume on the FTSE All-Share Index fell from nearly £14 billion in the same month in 2007 to about £3.6 billion ($4.6 billion) in July. Investors tend to pay less for illiquid stocks because they risk a larger loss when they sell. The UK MSCI stock index was trading at a 42 percent discount to its US counterpart in early August on a price-to-earnings basis. The decline in trading activity was seen across Europe, and the London Stock Exchange remains the busiest in Europe in terms of the amount of money traded daily.
Have other companies left London?
The larger investor pool in New York has prompted a number of companies to seek IPOs across the Atlantic. At the same time, fewer companies are attempting to go public in London. While this reflects a general slowdown in the global IPO market, investors have also been put off by the poor performance of some high-profile IPOs in 2021, including Deliveroo Plc and Dr Martens Plc. London-listed companies that have looked abroad include:
- In February, British pharmaceutical company Indivior Plc said could move its initial listing to the US.
- In the same month TUI AG shareholders vote for delisting from the LSE and are shifting trading primarily to Germany.
- A $20 billion merger in the packaging industry There is a possibility that London will lose another top company, Smurfit Kappa Group Plc, from its benchmark index.
- In 2022, the mining company BHP Group Ltd. changed its Main entry to Sydney, ending a dual arrangement with London that dated back to the company’s formation through a merger 20 years earlier.
- Also in 2022, Abcam Plc, a Cambridge-based biotechnology company valued at approximately $3.3 billion, has moved Its initial listing was from London to the US Nasdaq.
- In 2021, plumbing and heating products supplier Ferguson Plc moved to the US after trading as a FTSE 100 company for several years.
How is the London Stock Exchange doing at the moment?
The total capitalization of London-listed stocks fell from a peak of $4.3 trillion in 2007 to around $3.2 trillion in June 2024, according to data compiled by Bloomberg. During the same period, the value of U.S. stocks nearly tripled to $57 trillion. London is currently only the sixth largest city in the world, behind the USA, China, Japan, India and Hong Kong, and is similar in size to Paris – a striking reality check for an institution whose history stretches back more than 200 years. The decline began long before Brexit and the coronavirus pandemic, when a deeper productivity crisis pushed British economic output into the fast lane compared to other G7 industrialized nations.
What else is to blame?
In the early 2000s, the UK government introduced rules that forced pension fund managers to be more open about their investments and their plans to meet future pension obligations. One consequence was a shift away from riskier equities – until then the pension industry’s preferred investment – towards safer government bonds. This trend intensified over the next decade, as millions of workers retired on so-called defined benefit pension plans. Pension fund managers invested more in government bonds at the expense of equities to better meet their long-term obligations to these retirees. In addition, the small amount of equities that funds retained was increasingly invested in equities in other markets as they diversified their holdings. UK pension funds held only 1.6% of UK-listed shares in 2022a decline from around 32% in 1992, according to data from the Office for National Statistics.
Does Brexit play a role?
Due to Brexit, some private trading forums, so-called dark pools, and secondary listing exchanges have moved their operations from London to Amsterdam. Since Brexit, Amsterdam has also become more competitive compared to London and New York. Nevertheless, London had a 25% share of the European IPO market in 2021 – the largest of any city – before a global downturn set in in 2022.
What is Britain doing about it?
British regulators announced in July a overhaul of its rules for companies seeking to list in London. The new rules allow companies to carry out more activities without subjecting them to a shareholder vote, the Financial Conduct Authority said. They also make it easier for companies to have two classes of shares, a structure often favoured by entrepreneurs or early-stage investors who want to play a significant role in companies even after they go public. Deutsche Bank said the changes would increase the risks of buying shares and lead to a stronger “buyer beware” culture in equity investing in the UK.
What are the government’s plans?
Prime Minister Keir Starmer’s Labour Party, which came to power in July, promised in its manifest “to take action to increase pension fund investment in UK markets”. It outlined plans to encourage private investment through a 7.3 billion pound ($9.4 billion) national wealth fund and said it would “consider what further steps are needed to improve pension outcomes and increase investment in UK markets”. Chancellor of the Exchequer Rachel Reeves said she wanted British pension funds to learn from the Canadian model, where larger pension funds mean they can invest far more in productive infrastructure assets than Britain’s. That could impact how the funds allocate their resources.