London’s exchanges are losing companies again. It needs to stop.
Too many companies are delisting from the London Stock Exchange. It’s time for a little less conversation and a little more action, says Morning Wire
Even by recent standards, this has not been a banner week for London’s premier equity exchange.
So far this week no fewer than four firms have announced their intention to delist from various parts of London’s public markets ecosystem.
On Tuesday, the US-based insurance broker Marsh McLennan announced that they were abandoning their secondary listing in London, citing costs and the administrative burden as the reason why.
Tech firm Sopheon, listed on AIM, also announced that it was off, with US software and data firm Wellspring spending just north of £100m to take the UK outfit private.
Yesterday, London-listed biotech firm Arix Bioscience was picked off by RTW Global, a biotech venture fund, at a more than 40 per cent premium to its closing price. In some good news for London, at least, RTW are also listed in the capital.
There have also been a host of confirmations – EMIS delisting on Monday after their purchase by Minnesota-based UnitedHealth Group amongst them – all adding up to a general picture that whatever this party is, it’s time to bail out.
More, it appears, could be on the way.
Earlier today Sky News’ Mark Kleinman reported that Tremor International, the ad company, is exploring ditching London for New York.
All of that comes after a miserable summer and autumn – with take-privates of law firms (DWF), secondary listings in New York by gambling firms (Flutter) and plenty of noise about other potential moves (YouGov and Plus500) and, of course, the particularly painful miss that was Arm’s choice to list in New York.
In short, all is not well. Luckily, regulators and government have acknowledged there is a problem – and London Stock Exchange bosses are right to say that for all the sturm und drang, the capital remains the undoubted European leader for publicly-listed companies.
It’s also true that a much-hyped IPO of CVC in Amsterdam has been shelved, and even Arm in New York has seen its shares slip below the original offer price. New York is not the land of milk and honey many might think.
But at some point, public concern over the London stock exchange needs to translate into action.
Part of that is nuts and bolts: combining our two listing types into one, working to reduce the costs of listing.
Some of it is more regulatory: re-shaping the research market by taking advantage of post-Brexit, post-MIFID II freedoms to allow for the effective subsidy of analyst reports. Charles Hall at Peel Hunt, and Hogan Lovells lawyer Rachel Kent, are leading this charge with aplomb.
Most of it is cultural, however. Our public markets appear, at least, to have become more short-term. Take-privates don’t happen in a vacuum; they happen because private capital believes a firm is worth more than the combined wisdom of the market; ie, they believe it’s undervalued by the animal forces of public exchanges. Is the market undervaluing long-term revenue opportunities in favour of short-term gains? Why are London’s price to earnings ratios so much poorer than in New York?
These short-selling concerns are not new.
In the mid-1980s, then-Chancellor Nigel Lawson bemoaned just this.
“The big institutional investors nowadays increasingly react to short-term pressure on investment performance… (they) are unwilling to countenance long-term investment,” he said.
Of course, those same institutional investors almost four decades on are now being relied on – via the Mansion House compact – as the engine of long-term investment. The wheel turns.
Of course, identifying the problem is one thing. Solving it, however, is a different one. Plenty of solutions have been mooted – cracking down on short-sellers and replacing quarterly reporting with half-yearly – but getting a shift on is what matters.
A little less conversation, and a little more action, please.