Several major companies are eyeing potential stock listings in London, including miner Anglo American Platinum Ltd., Hong Kong conglomerate CK Infrastructure Holdings Ltd. and Chinese fast-fashion giant Shein. The surge of interest suggests that the fortunes of the UK stock market may be improving after many years of depressed activity. An attempt by the new Labor government to channel more money from British pension funds into local shares could help. But the market is still much smaller than before the 2008 global financial crisis, and a recent withdrawal of investors from European equities has hit London harder than other European markets.
What’s in the pipeline?
- Shein confidential submitted They filed papers with British authorities in June for a possible IPO in London, according to people familiar with the matter. Analysts said the prospects for such a listing were uncertain and would be controversial to assure about the ethics and sustainability of Shein’s business model. The company, which could have a valuation of around £50 billion ($64 billion), was set up in China, but is based in Singapore.
- French media and communications group Vivendi SE plans to do just that list its Canal+ broadcasting operations in London as part of the breakup of the company.
- Amplats has said it is evaluating a secondary UK listing to follow on from its spin-off 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 or London insurer Canopius Group have started preparing initial public offerings in the British capital for 2025.
What went wrong on the London stock market?
London’s reputation as a stock exchange destination for international companies has suffered as several companies, including CRH Plc and Flutter Entertainment Plc — chose to move their main stock listing to New York. Even London’s largest inter-dealer broker, TP ICAP Group Plc, is looking at the US in the same way considers an IPO of a lucrative data company. A particularly bitter blow was London’s inability to land one of Britain’s most promising technology companies: Cambridge, England-based chip designer Arm Holdings Plc. Despite lobbying Government ministers and an offer to relax UK listing rules led Arm’s Japanese parent SoftBank Group Corp. to choose. for New York for its return to the public markets.
How bad is the downturn in the London stock market?
Activity has shrunk dramatically from a pre-financial crisis peak, with average daily trading volume on the FTSE All-Share Index falling to around £3.6 billion ($4) in July from almost £14 billion in the same month of 2007. .6 billion). pay less for illiquid stocks because they risk a greater loss if sold. The MSCI UK stock index was trading at a 42% discount to its US counterpart in early August, based on forward price-to-earnings ratios. It is fair to say that the decline in trading activity has been across Europe and the London Stock Exchange remains the busiest in Europe in terms of the amount of money changing hands every day.
Have other companies left London?
The larger pool of investors in New York has prompted a number of companies to seek listings on the other side of the Atlantic. At the same time, fewer companies are attempting an IPO in London. While this reflects a broader slowdown in the global IPO market, investors were also put off by the poor performance of some high-profile listings in 2021, including Deliveroo Plc and Dr. Martens Plc. Among the London-listed companies that have looked abroad:
- In February, British drugmaker Indivior Plc said this could move its primary listing to the US.
- The same month, The shareholders of TUI AG voted in favor of delisting from the LSE and move trading mainly to Germany.
- A $20 billion merger in the packaging industry created the prospect of London losing another top company, Smurfit Kappa Group Plc, from its benchmark index.
- In 2022, miner BHP Group Ltd. about from masterlist to Sydney, ending a dual agreement with London dating back to the company’s founding through a merger twenty years earlier.
- Also in 2022, Abcam Plc, a Cambridge-based biotechnology company valued at approximately $3.3 billion, will moved the primary listing from London to the American Nasdaq.
- In 2021, plumbing and heating products supplier Ferguson Plc moved into the US after trading as a FTSE 100 company for several years.
Where is the London stock market now?
The total capitalization of London-listed shares fell from a high 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 now only the sixth largest in the world after the US, China, Japan, India and Hong Kong and comparable in size to Paris, a powerful reality check for an institution whose history dates back more than 200 years. The decline started well before Brexit and the coronavirus pandemic, when a deepening productivity crisis put Britain’s economic performance on a back burner relative to other developed Group of Seven countries.
What else is to blame?
In the early 2000s, the British government introduced rules that forced pension fund managers to be more open about their investments and how they planned to meet future pension obligations. One result was a shift from riskier shares – until then the pension sector’s favorite investment – to safer government bonds. This trend intensified over the next decade as millions of workers with so-called defined benefit plans retired. Pension managers have doubled their government debt at the expense of equities so they could better tailor their long-term obligations to those retirees. In addition, what little equity allocation the funds retained was increasingly put into stocks in other markets as they diversified their investments. British pension funds held just 1.6% of UK-listed shares in 2022down from around 32% in 1992, according to data from the Office for National Statistics.
Is Brexit a factor?
As a result of Brexit, some private trading forums known as 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. Yet London took a 25% share of the European IPO market in 2021 – the largest of any city – before a global recession hit in 2022.
What is Britain doing about it?
British regulators issued a revision of their rules for companies looking to make their public debut in London. According to the Financial Conduct Authority, the new regulations will allow companies to carry out more activities without having to vote on them by shareholders. They also make it easier for companies to have two types of shares, a structure often favored by entrepreneurs or early-stage investors who want to play a major role in companies even after they go public. Deutsche Bank said the changes would increase the risks of buying shares and lead to a more ‘buyer beware’ culture in share investing in Britain.
What are the government’s plans?
Prime Minister Keir Starmer’s Labor Party, which came to power in July, promised that manifesto to “act to increase pension fund investment in the UK markets.” It outlined plans to boost private investment through a £7.3 billion ($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 has said she wants British pension funds to learn from the Canadian model, where larger pension plans mean they can invest far more in productive infrastructure assets than those in Britain. This can influence the way funds allocate resources.
