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London's stock market misery grows

Bloomberg
Bloomberg8/25/2022 04:37 PM GMT+08  • 3 min read
London's stock market misery grows
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A rise in companies fleeing the UK stock market is another blow to London’s status as Europe’s top financial centre, adding to the gloom around a lack of initial public offerings.

US-based tech investor Allied Minds Plc said Wednesday it wants to delist from the London Stock Exchange, blaming its exit on the “prohibitively high” cost of maintaining a premium listing. Mining giant BHP Group earlier this year scrapped its top-tier quotation in the UK in favour of a primary listing in Australia, giving up its place in Britain’s blue-chip FTSE 100 index.

The exits are hampering efforts to boost London’s cachet as a global financial nexus and a premier listing venue. The government has been working especially hard to court startups and tech companies, doling out tax breaks and easing the path to public markets. But since the Brexit vote in 2016, the UK has been plagued by slowing IPO activity, high-profile flops and political turmoil.

“There’s no denying that Brexit made the admin and expense side of a London listing more of a problem,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown Plc. “While the UK would love to rebrand itself as a haven for fast-growing, stimulating tech stories in particular, we are some way from that happening.”

Irish discount airline Ryanair Holdings Plc last November became the first major company to blame its departure from the London Stock Exchange on Brexit. And commercial landlord Hammerson Plc and warehouse operator Segro Plc sought secondary listings on continental European exchanges to maintain access to the wider market.

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UK stocks have lagged other major equity benchmarks in Europe over the past six years. Cheap valuations have unleashed a flood of share buybacks by UK Plc and encouraged foreign buyers and private equity firms to swoop in and pick up bargains, helping the FTSE 100 outperform other developed markets this year.

The British government’s pursuit of wide-ranging changes to London’s listing rules, including doing away with the two-tier system of standard and premium listings, to lure more issuers to the City isn’t exactly paying off. While 2021 was a blockbuster year for London IPOs, the disastrous performance of newcomers like Deliveroo Plc, THG Plc and Wise Plc is putting off investors and listing candidates alike.

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Now, the UK is struggling to find its feet against a much more challenging market backdrop. IPO proceeds only tally US$1.5 billion so far in 2022, a 91% drop from this time last year, data compiled by Bloomberg show. While listing activity has stalled globally, London is lagging behind other European venues like Milan and Zurich.

Still, there is hope that the changes being implemented now will pay off in the long run. The City is still the financial heart of Europe, with by far the deepest pool of capital and a strong ecosystem of investment banks, law firms, brokers and consultants.

“With considerable uncertainty in the world, we will likely go through a fallow period for London listings -- no matter what rule changes are enacted,” said Nick Bryans, a partner in law firm Baker McKenzie’s London office. But when the IPO window opens up again, “having a flexible listing regime with features the market wants can only help London compete,” he said.

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