‘Our reforms are working’: Is the London Stock Exchange on the cusp of a revival?
Hopes are growing that the City’s listings drought could soon be quenched as a wave of top firms draw up plans to debut on the London Stock Exchange in the coming months.
Talk of a revival in the Square Mile was amplified today after computer-maker Raspberry Pi set out its plans for a £157m float next week and reports emerged that the Chinese-founded fast-fashion giant Shein was set to file an IPO prospectus with the Financial Conduct Authority.
Raspberry Pi’s listing next week is expected to fetch the company a price tag of about £500m and could be a boon to the London Stock Exchange, which has been starved of new tech listings in recent years.
Speaking ahead of its float plans last year, Raspberry Pi chief and founder Eben Upton said there was “smart money” in the City and he had opted to U-turn on his initial plans to list the company in New York, bucking a trend that has plagued the capital’s bourse in recent years.
While Shein’s potential IPO has divided opinion due to its perceived ties to China and concerns over its labour practices, analysts and investors are hoping it could trigger a wave of interest from bigger companies.
“The reforms that we have been making to the UK markets are working,” Mark Austin, a partner at Latham & Watkins who has led much of the City’s reform efforts, told Morning Wire
“The friction points have been removed and issuers and investors are listening and taking note. And that is reflected in the growing pipeline of IPOs of companies from a range of sectors that are being lined up for the London markets.”
Nigerian mining firm Dangote is also aiming for a dual listing on the London and Lagos bourses, a senior executive said last week.
Investment bank Peel Hunt said it now saw the IPO market as “selectively open” after the uptick in interest from companies.
“Investor appetite for IPOs is improving, helped by stronger performance of UK equity markets as well as an increase in cash on-hand due to the scale of M&A activity and share buybacks,” Peel Hunt’s head of research, Charles Hall, told City A.M.
Rule overhaul for the London Stock Exchange
Ministers and regulators have been scrambling to overhaul City rules over the past three years in an attempt to revive the shuttered IPO market.
After Cambridge-chipmaker Arm snubbed the London Stock Exchange to float across the pond last year, the Financial Conduct Authority quickly scrambled to overhaul its listing rules in a bid to ease the regulatory burden on listed companies.
If you can persuade a whole section of savings to go into the UK and you’re gonna make it really simple, that of course is going to be positive
TimCockroft, Singer Capital Markets
While stringent rules have been regarded as a friction point by some firms, the market has simultaneously been rocked by an exodus of cash as investors yank funds from the UK-focused equity funds in favour of the US.
UK investors pumped £5.27bn of total capital into US focused funds in the first three months of the year. UK equity funds, meanwhile, saw outflows jump to their highest level since February 2023, capping off 34 consecutive months of net selling.
The government has looked to boost the flow of cash into the market with measures like the British ISA, which Labour has said it will likely back if elected to government, and encouraging more pension cash into UK companies.
Speaking with Morning Wire yesterday, Tim Cockroft, the founder and executive chair of small cap investment bank Singer Capital Markets, said while the changes would not shift the dial alone, as a package they were “helpful”.
“If you can persuade a whole section of savings to go into the UK and you’re gonna make it really simple, that of course is going to be positive,” he said.
Releasing more pension cash into the stock market could also be “huge” in reviving its appeal, Cockroft added.
A number of the City’s reform measures now hang in limbo, however, after Rishi Sunak’s call to hold an election in July. The Treasury has already confirmed that a much-touted retail sale of Natwest shares has been shelved and the fate of its hybrid public-private market, Pisces, is unclear.