As London’s initial public offerings fall to levels not seen since 2008, the UK is intensifying its efforts to increase listing activity.
Last week, the British market watchdog recommended that premium and standard listings be eliminated to create one category for companies looking to IPO in London. This is the latest in a larger campaign that has been launched over the last year to attract more startups, and improve the capital’s standing in a post-Brexit world.
Proposed rule changes such as allowing founders to keep control of companies after they are listed have not had an impact on activity. Meanwhile, high-growth stocks that the UK is trying to acquire have been falling out of favour due to rising interest rates. According to Bloomberg data, London’s IPO market has seen its worst half since 2009. In 2022, only £604 million (or $764 million) was raised.
London’s first half of IPOs is expected to be the worst since 2009.
“Simplifying the process will likely be music for the ears of companies contemplating a London listing,” Robin Walker said in written comments. Noting that the City faces competition from the US but also from Amsterdam and Stockholm, the IPO specialist at Equiniti Group Plc stated that.
In the wake of Brexit, London is slowly losing ground to the continental exchanges. The Netherlands and Sweden have been closing the listing gap over the last couple of years. Recent flops such as Deliveroo plc or THG Plc have cooled investor appetite in the UK.
Many British companies are leaving the US to get a home listing. They are lured by higher valuations and greater capital. Blank-check mergers are a popular route to public markets in the UK for startups. They have been used by Babylon Holdings Ltd. and Cazoo Ltd.
Although the proposed changes may open the door to index inclusion for tech companies with unequal vote rights it is not certain that streamlining the rules will eliminate this obstacle. Only stocks that trade on the premium segment are eligible for inclusion in the FTSE Russell benchmarks. They must also comply with strict governance and disclosure requirements. Passive investment flows can be accessed only if they are trading on the premium section.
Susannah Streeter, a senior analyst at Hargreaves Lansdown Plc, stated that while simplifying London’s listing system may encourage high-growth companies in the UK to remain, more work needs to be done to increase access to the market like getting rid of old-fashioned prospectuses.
She stated that retail investors should have more opportunities to invest in IPOs, as the vast majority of institutional investors are currently limited.
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