The former head of the London Stock Exchange Group has warned its flagship bourse has become “deeply uncompetitive” amid its biggest exodus since the financial crisis.
Xavier Rolet, who ran LSEG between 2009 and 2017, said lackluster trading in London created a “real threat” of more UK firms ditching their listings in the capital for better returns overseas.
His comments come after FTSE 100 equipment rental firm Ashtead confirmed plans to move its main listing to the US, following in the footsteps of several other big companies in recent years.
LSEG data shows 88 companies have either delisted or transferred their primary listing away from London’s main market this year, while just 18 firms have joined.
The figures, first reported by the Financial Times, mark the most significant net outflow of firms from the market since the financial crisis in 2009.
The number of new listings is also on track to be the lowest in 15 years as companies mulling IPOs are put off by relatively cheap valuations compared to other financial centers.
More than 100 billion pounds ($126.24 billion) worth of listed companies have prepared to leave London’s stock market this year, either by agreeing to takeover deals at often hefty premiums or to delist.
Rolet added that falling volumes of trading in London in recent years compared to a sharp rise across the pond meant companies were forced to price their shares more cheaply in the UK to attract investors.
He told The Telegraph: “Simple maths suggests that an illiquid market will require too much of an issuance discount for even a run-of-the-mill IPO.”
“The same illiquidity will also affect post-IPO valuation too. In other words, the cost of equity capital would make such a market deeply uncompetitive.”
Shares in London now trade at an average discount of 52% compared to their US counterparts, according to Goldman Sachs.
The capital’s continued struggles are a blow to the UK government, which has scrambled to streamline the regulatory rulebook and reform the domestic pensions system to encourage more investment.
Rolet said the UK needed to scrap EU red tape deterring pension funds from owning stocks, as well as lowering taxes on share trading and dividends.
He argued: “My concern today is not so much for tech IPOs, that ship has sailed.
“The real threat has moved elsewhere in my opinion. If one takes the time to listen carefully to recent statements of prominent European blue-chip CEOs, [they] have raised the possibility of moving to the US to take advantage of lower costs of capital and energy, higher multiples and preferential tariffs.”
