The London Stock Exchange (LSE) saw the largest outflow of companies since the global financial crisis during last year, according to the audit and accountancy company EY.
The LSE lost 88 companies, which chose to move their primary listing to another market or delist completely. Many of the leavers cited falling liquidity and lower valuations as the reasons for departure, as they sought green pastures, particularly in the US.
Takeaway giant Just Eat, gambling company Flutter, travel group Tui, and equipment rental company Ashtead all announced plans to abandon the LSE last year. Flutter took its primary listing to New York, where it said could access the “world's deepest and most liquid capital markets”. Just Eat dumped the LSE altogether complaining about the “administrative burden, complexity and costs” associated having its main market listing in London.
“Ongoing geopolitical instability, slow economic growth and a diminished appetite for domestic equities among pension funds have impacted valuations and liquidity,” said Scott McCubbin, EY's IPO lead for the UK and Ireland. “We also saw the largest outflow of companies from the main market since the global financial crisis as companies sought access to a deeper pool of investors and the prospect of improved liquidity on other exchanges.”
Mergers, acquisitions and private equity
But while the outflow of companies made headlines in the UK financial press describing a great flight from the London market, some analysts pointed out the majority of the delistings were down to mergers and acquisitions, rather than an overwhelming desire to jump into the bigger liquidity pools on the other side of the Atlantic.
“Nearly 50 were taken over, at an average premium of 45 per cent,” Russ Mould, investment director at AJ Bell told The National. “All that says to me is that either trade or financial buyers thought that there was value to be had in London-listed assets and they acted accordingly by buying them, and it is hard to see that as a negative, since the price or valuation paid is the ultimate arbiter of investment return.”
Indeed, EY's research showed 18 companies listed on the LSE last year, raising £3.4 billon – a 256 per cent increase on 2023. In addition, the final quarter of last year saw a big increase in the number of companies joining the LSE either through initial public offerings (IPOs) or share listings. Of the 18 companies that floated on the LSE last year, eight did so in the fourth quarter, including the French media giant, Canal+, which having raised £2.6 billon was the LSE's largest share listing in two years.
A spokesman for the UK Treasury said IPOs like that of Canal+ “demonstrate confidence in our capital markets”.
“We want to continue attracting exciting businesses to the UK. That's why we are creating pension megafunds to unlock billions of pounds of potential investment for businesses, as well as backing the largest overhaul of UK listings rules in decades,” he added.
Subdued global markets
The LSE's performance also needs to be viewed in the context of other stock markets across the world. EY's research showed IPO volumes fell 10 per cent around the world – the global IPO market saw 1,215 deals, raising $121.2 billon last year, which was about 4 per cent lower than 2023. India claimed the top slot for the number of stock market flotations with 327 deals, while the US markets regained the leading position in terms of capital raised from IPOs, with proceeds from new listings coming in at $27.6 billon last year.
Meanwhile, stock markets in the Asia-Pacific region saw a 35 per cent decline in the number of deals and a 51 per cent fall in IPO proceeds compared to 2023. EY said this was largely driven by tighter regulations in China, where the market saw its weakest IPO numbers in a decade. Likewise, the Australian stock market recorded its sharpest decline in IPO volumes in more than two decades.
Nonetheless, despite a few disappointments, including the recent move by the Lloyd's of London underwriter Aspen Insurance to seek a listing in New York rather than London, some analysts are hopeful the London market will see an sharp rise in IPO activity in 2025. “As we enter 2025, there are reasons for cautious optimism,” Mr McCubbin said. “A stabilised domestic policy environment post-election, robust pipeline of deals, and listings reform are creating opportunities to restore London’s competitiveness, which could drive a rebound in activity in H1 2025. Businesses eyeing IPOs will be closely watching the market to time their public offerings effectively.”
Others are more guarded and point out that the reforms to regulations which started under the previous Conservative government still need to be realised. In addition, a particular bugbear for those working the London stock market remains the transactional tax, stamp duty, which is applied on the buying of shares in the UK.
“Market participants have long been calling for the playing field to be levelled in order to attract more business to the UK, not least of which is the anachronistic level of stamp duty applied to the purchase of UK shares where, by comparison, nothing is charged for the purchase of US shares, even for UK investors,” Richard Hunter, head of markets at Interactive Investors told The National.
“The simple truth is that this is a market in need of concentrated attention and renewal. It remains debatable as to whether the minimal steps made to date by the authorities will have the desired effect, or whether rather more revolutionary rather than evolutionary measures are required. While there may have been signs that the UK is beginning to position itself as a more attractive investment destination, given the strength of the opposing tide, it is far too early to call anything like a full-blown recovery,” he added.
