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The London Stock Exchange witnessed more firms exiting due to acquisitions than those joining through initial public offerings (IPOs) over the past decade, according to an examination reviewed by the Mail.
The Implications of Takeovers and New Listings
Acquisitions vs. Public Listings
Data from the financial intelligence group Dealogic reveals that 585 companies, valued at a collective £779 billion, have exited the London market since 2015 due to takeovers by rivals or private equity firms.
In contrast, 567 companies joined either the LSE’s primary market or the junior division AIM during the same period. These firms had a combined valuation of £66 billion, significantly lower than those that departed, as many newcomers were fledgling companies seeking growth.
The Health of London’s Stock Market
The findings have sparked concerns over the vitality of London’s stock exchange, the City of London’s financial district, and the broader UK economy. Despite acquisitions reducing the number of companies with shares traded on its equity market, the LSE has faltered in attracting fresh listings through IPOs.
Competitors such as the New York Stock Exchange and Nasdaq have consistently surpassed the LSE in hosting new stock offerings, thereby contributing to London’s decline.
Challenges in Attracting Foreign Firms
Samuel Kerr, of Dealogic’s parent company ION Analytics, noted that the LSE has faced difficulties in drawing overseas companies to list in London in recent years.
While upcoming Financial Conduct Authority (FCA) reforms aim to streamline the process for companies to go public, it remains uncertain whether these changes will reverse London’s downward trend.
‘A significant portion of this slowdown can be traced back to the need for the LSE to redefine its identity following the UK’s departure from the European single market,’ Kerr explained. ‘London is no longer the primary English-speaking, common law gateway to European markets as it once was.’
‘The FCA’s new listing reforms have reduced some regulatory hurdles associated with a London listing,’ he added. ‘However, the true test will be whether the LSE can attract substantial IPO candidates in 2025 and beyond.’
Annual Trends and Notable Cases
Departures and IPOs in Recent Years
The previous year saw 60 companies, worth a combined £59.4 billion, leave the LSE due to takeovers. Comparatively, only 13 companies floated in London, with deals totaling £725 million.
Since London listings peaked at 125 in 2021, the number of deals has fallen sharply. In the same period, an average of 61 companies have left the LSE annually.
Potential Turnaround with Shein
One anticipated IPO in London is that of the Chinese fast-fashion giant Shein.
The Road Ahead
Despite hopes that Shein’s IPO could signal a recovery for London’s market, AJ Bell investment director Russ Mould cautioned that it is far from guaranteed.
He noted: ‘If Shein proceeds, it will be significant, but we are not there yet. It still needs to secure regulatory approval due to concerns about its supply chains.’
‘Ultimately, this deal will likely hinge on valuation, and it will probably be valued lower than its listed competitors, even with the IPO discount,’ Mould added.
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