Revolutionary Beverage Alert: WE Soda Set to Take London by Storm – Find Out Why!

Craig Coben is a former global head of equity capital markets at Bank of America and now the managing director of Seda Experts, an appraisal firm specializing in financial services.

Rejoice! WE Soda, the world’s leading producer of soda ash, has announced the intention to list on the London Stock Exchange (LSE). The company is apparently “targeting a valuation of approximately $7.5 billion [equity value]enough to enter the FTSE 100.”

The news was hailed as a “much needed push” it’s a “Ray of lightfor the City amid an IPO drought and a series of planned cancellations by the LSE.

WE Soda CEO, a former senior investment banker, explained to MainFT because it has chosen London as the listing venue:

“In London, we can be a big fish in a relatively modest sized pond,” WE Soda chief executive Alasdair Warren said in an interview. “The reason we chose London is because we are a European-focused company based in the UK and our founder is based here. . . within industrials and quarrying, it is a good place to be listed.

Fears about the future of the London market rose after chip designer Arm rejected government pleas to list in the UK and CRH, the world’s largest building materials group, announced plans to move its listing on Wall Street.

“There are benefits [to companies] coming at a time where no one else is because you get a lot of attention,” added Warren.

These are all credible and reasonable reasons to list in the UK. But behind the decision there is something else.

First, it confirms that London is the default listing exchange for emerging market companies when they have nowhere else to list. Formed and headquartered in the UK, WE Soda is British in form but Turkish in essence: its main shareholder is a Turkish tycoon and most of its manufacturing assets are in Turkey.

Istanbul has a buoyant stock market, but Turkish stocks pretty much are not investable. THE Great British weight it may have depreciated after Brexit, but it hasn’t fully depreciated degraded AND dissolute such as the Turkish lira. Inflation in Türkiye stays very highwith increases on a monthly basis that stabilize only thanks to basic effects. After the re-election of President Recep Tayyip Erdogan, investors fear that the government may appeal capital controls to stabilize the lira, and these in turn could affect the repatriation of dividends.

Any Turkish company that can credibly list itself abroad, such as an exporter like WE Soda whose revenues are denominated in US dollars and euros, will do so.

WE Soda’s upcoming IPO is a throwback to the heyday (if that’s the right term) of emerging market companies’ listings on the LSE. The flow of these IPOs has dried up over the past decade for several reasons, ranging from weaker commodity prices to more developed domestic capital markets to deteriorating relations with Russia since the 2014 annexation of Crimea.

That said, London’s status as an LVLR (listing seat of last resort) is not entirely secure, as Brexit has made Amsterdam a valid alternative. While the Polish beverage company stocks up on alcohol IPO in London in 2013Kraków-based parcel locker company InPost chose Amsterdam for its 2021 IPO.

WE Soda could have chosen to go public on a continental stock exchange. Presumably the larger size and reach of London – coupled with the fact that WE Soda was already set up several years ago in the UK – tipped the balance this time around. London may not be so lucky in the future.

Secondly, WE Soda’s decision does not herald the arrival of new age sectors in the London market. Much of the discussion surrounding the revival of UK equity capital markets revolves around the attraction of venture capital-backed companies in cutting-edge tech and biotech sectors. In fact, many of the recent changes to the UK listing rules, such as reducing free float requirements and allowing for dual class share structureswere specifically aimed at promoting “growth and innovation.”

But this isn’t an IPO from a disruptive tech player. Natural soda ash has a key role for sustainable solutions, but this is basically a chemical company with industrial applications. London craves avant-garde companies, but still appeals mostly to arrière-garde industries.

Thirdly, shares on offer to retail investors are scarce – just €8m (£6.95m) in total via the Main offer platform. This has to do with the intersection of two pre-existing EU rules: the requirement for a minimum bidding period of six days in a public offering, together with a rule limit retail investor allocations a €8 minutes if there is no prospectus. To avoid the six day period, the IPO uses an explorer and not a prospectus and is therefore effectively structured as a private placement with a small bolt-on retail offering.

In effect, the rules end up taking the “public” out of what is supposed to be an initial public offering. It’s hard to cultivate an equity culture if you don’t let retail investors step over the velvet rope and into the VIP room of IPO allocations. The change is long overdue and both rules are scheduled to be changed. But like Tom Petty He sang“wai-ai-aiting is the hardest part”.

Fourthly, the offer is not a litmus test for the London market. IPO globally – if Milan, FrankfurtOR Hong Kong – were dogged by weak demand and milquetoast aftermarket buying, particularly by so-called “long-only” investors who suffered losses after acting as key investors in the 2020 and 2021 IPOs. WE Soda’s outcome will depend on market conditions, soda ash prices, the credibility of forecasts and a myriad of other factors. The exchange of quotes is largely irrelevant to the success or failure of the deal.

So London will not salvage or derail the deal. It depends on the markets, the management and the company. And that’s how it should be.