As recently as 2013, almost half of all European financing came from UK initial public offerings (IPOs). Bloomberg’s data shows that this year, that percentage has decreased to 3%.
In a further setback to its reputation as a global financial center, London has fallen out of the top 20 IPO markets in the world as the third quarter draws to a close, falling behind Singapore and Mexico.
According to a Bloomberg survey of the busiest IPO destinations worldwide, the UK exchange has fallen three spots to 23rd, behind only Oman’s frontier market. This year’s harvest was the lowest in almost 35 years, with volume falling 69% to $248 million.
The April selling from accounting firm MHA Plc, the biggest London initial public offering of the year, garnered £98 million ($132 million). Small local firms like Cavendish Plc and Singer Capital Markets facilitated the trades; no big Wall Street bank was engaged.
According to figures collated by Bloomberg, the third-quarter picture is even more dire, with just $42 million in transaction activity, down 85% from the same time last year.
Competition from European competitors and emerging centers in Asia and the Middle East have undermined London’s centuries-old position as a global financial center. Companies are fleeing to private purchasers or the deeper capital markets in New York as a result of lower values. Because of this, London’s significance has decreased from when it was consistently among the largest IPO players in the world.
According to Leonard Keller, a portfolio manager at Berenberg, “when values are low, private owners hesitate to IPO at a discount, while listed enterprises become takeover targets instead.” “The UK has several fascinating firms, but private equity may start with London’s value discount.”
The figures demonstrate how quickly London’s fortunes have declined in less than 20 years. With listings from Russian oil company Rosneft, department store owner Debenhams Plc, and Scottish insurance giant Standard Life Plc, fundraising reached an all-time high of $51 billion in 2006. Compared to the same time period in 2006, this year’s total is 99% lower.
As recently as 2013, almost half of all European financing came from UK initial public offerings (IPOs). Bloomberg’s data shows that this year, that percentage has decreased to 3%.
Other markets are leading the way. Thanks to property trust listings, Singapore raised $1.44 billion this year, propelling it to ninth position. Mexico has almost doubled London’s listing volume this year, with $460 million in sales, making it the 19th busiest listing location. Last year, both showed little to no activity.
Compared to Croatia, Norway, and the West African regional stock exchange known as BRVM, London’s initial public offerings (IPO) volumes are still somewhat higher.
According to Barney Hussey-Yeo, CEO of the British fintech firm Cleo AI Ltd., the absence of London IPOs would have a knock-on impact that will reduce talent, tax income, and wealth creation in the United Kingdom.
According to Hussey-Yeo, “the London Stock Exchange is not suitable for purpose,” according to the prosperous founders in Europe.
Losing Out
Europe’s stock markets are vying for the largest listings as fewer major businesses go public there. In order to host Hellman & Friedman’s initial public offering (IPO) of alarm provider Verisure Plc, which aims to generate around €3 billion ($3.5 billion), London was in competition with Stockholm, Amsterdam, and Zurich. In the end, the Swedish capital prevailed.
For the spinoff of its Magnum ice cream operation, consumer goods behemoth Unilever Plc chose Amsterdam as the primary listing location, with subsidiary listings in London and New York. Aiming for an IPO value of at least €30 billion next year, defense maker Czechoslovak Group AS was eyeing London before choosing Amsterdam because of its more lenient regulatory environment, according to individuals familiar with the situation. A CSG official chose not to comment.
As private equity groups buy up cheap businesses, the number of UK-listed companies is shrinking. This year, KKR & Co. has approached at least three London-listed firms about taking them over. ICG Plc, Macquarie Asset Management, Permira, Stonepeak Partners, Warburg Pincus, Bain Capital, Blackstone Inc., and Brookfield have all chased transactions in recent months.
When a bidding battle erupted for Spectris Plc, a manufacturer of precision testing equipment, it became evident how cheap certain stocks had gotten. After outbidding Advent, KKR agreed to purchase Spectris for £4.2 billion, which was more than double its pre-approach value.
According to Rupert Soames, a former City of London grandee who now serves as the head of the Confederation of British Industry, “private equity is taking firms off the market, but they are not bringing them back after they work their magic on them.” “There has really been a net loss.”
In an effort to revitalize the public markets, UK authorities have implemented changes. These include changing regulations around CEO compensation and dual-class share structures, which will facilitate the process of raising more money. Last week, FTSE Russell, the company that creates the blue-chip FTSE 100 index, began to make stocks that do not trade in British pounds part of UK indexes and reduced the threshold for companies looking to enter the indexes quickly after initial public offerings.
Julia Hoggett, the CEO of the London Stock Exchange, has promised to expand the junior AIM market in London and is advocating for a new platform for investors to trade private company shares. She will give a speech at Bloomberg’s Women, Money & Power event in the UK capital on October 1.
“Stay away from the UK.”
Businesses are moving out of London. In order to access larger liquidity pools, Wise Plc intends to relocate the money-transfer company’s main listing to New York. Leading British pharmaceutical company AstraZeneca Plc said this week that it would upgrade a listing where it already sees high trading activity by listing its ordinary shares directly on the New York Stock Exchange rather than via American depositary receipts.
Momentum is a crucial component, and several major UK-listed businesses have expressed the opinion that equities prices in the US are superior. said James Congdon, who is in charge of Canaccord Genuity Group Inc.’s Quest research branch. “Unfortunately, it suggests that it would be wise to stay away from the UK.”
Stockbrokers like Peel Hunt Ltd. and Zeus Capital Ltd. have reduced workers as a result of the general market downturn in the UK. In June, Peel Hunt said that its losses increased in the most recent fiscal year due to restructuring expenses and a lack of London initial public offerings. Since then, it has taken on a more upbeat tone, claiming that M&A activity and “nascent” ECM activities are helping it to track ahead of forecasts.
Before the year ends, there will be more transactions in London’s IPO market. Tria Laser hair removal equipment manufacturer Beauty Tech Group Plc has started accepting orders for an initial public offering (IPO) that may fetch up to £320 million. According to Bloomberg News, Princes Ltd., a company that produces canned tuna, has also been thinking about going public in the UK this fall. Following its Nasdaq IPO, Fermi Inc., an energy REIT co-founded by former US politician Rick Perry, intends to go public in London.
According to an LSE spokeswoman, the pipeline of businesses aiming to go public in the next months is encouraging. They went on to say that follow-on offers continue to see robust activity, making initial public offerings (IPOs) not the exclusive measure of the strength of the UK capital markets.
Next year could see a greater rise. According to Bloomberg News, the software company Visma, which was financed by HG and was recently valued at €19 billion, has tentatively chosen London for its 2026 flotation, which may be the largest IPO in the market in years. According to those with knowledge of the situation, Uzbek gold miner Navoi Mining & Metallurgical Co. and British tourism agency Loveholidays are also preparing to list in London.
According to Valeriya Vitkova, a senior professor at the Bayes Business School in London, the US is still the favored IPO destination because of its higher valuations and more accommodating investor base, but for the time being, competitor European sites have better pipelines of future listings.
According to Soames of the CBI, the low allocation of British capital to local shares and the UK stamp tax on stock transactions are two of the issues slowing down the market. Nevertheless, he said he was certain that adjustments to the rules may help improve the situation.
“There is a lot of movement right now to modify regulations,” Soames said. “Do not lose hope; London is still the best.”