The London Stock Exchange (LSE) is upping its campaign to attract more floats, warning IPO candidates that a US listing could prove expensive. In a document shared with bankers and IPO hopefuls, the LSE said underwriting fees for LSE listings can be more than double those levied by advisors in the UK.
US fees typically range between 6pc and 7pc, while cost in the UK are normally between 3pc and 5pc, the LSE’s analysis found. It added that companies face a “lower litigation risk” if they are listed in London. The LSE said 3.3pc of all US-listed firms were sued in 2023, with 215 new securities class action lawsuits over the year.
In comparison, the LSE found there have been just five UK class actions against London-listed firms since 2008. The LSE analysis, ‘Mythbusting – UK vs US’, marks the bourse’s latest attempt to challenge perceptions that companies get higher valuations and better liquidity floating in New York rather than in London.
A slew of big names have snubbed the LSE to debut on the New York stock exchange and Nasdaq in recent years, while several large firms already trading in London are considering moving their listings overseas.
Shares in Cambridge-based chip designer Arm have surged 96pc since it listed in Nasdaq in spite of UK government lobbying efforts in September 2023. Its market capitalisation of $125.1bn would make Arm the fifth-biggest company on the FTSE 100 if it were listed in London.
While acknowledging the success of Arm and London-based trading services provider Marex, the LSE found that most of the 20 UK companies that have raised more than $100m through US listings since 2014 have struggled to boost their share prices. It said four of the companies are trading higher, nine have delisted and the remaining seven are trading lower by an average of 85pc as of the end of February.
The LSE analysed four large firms that have switched their primary listing from London to New York in recent years. It said it found that movements seen in discounts or premiums to peers have largely been “moderate”. It added that this suggested any changes in valuation are due to “industry trends rather than the change in listing”.
Other findings include that London has a more diverse range of investors than the US, inclusion in Britain’s FTSE indices is more likely than America’s S&P 500, and liquidity is broadly the same in both countries.
Last year was the worst period for London IPOs since the financial crisis, and policymakers have introduced urgent reforms designed to shore up the market. Nevertheless, despite the changes just four companies have listed in London so far this year.
Singapore-based fast fashion retailor Shein and Swiss security group Verisure are among the largest companies looking to IPO this year, in what will be a test for London’s allure compared to other venues. It was reported in TheTimes last month, that recent market volatility could derail Santander-backed payments firm Ebury’s plans for a £2bn listing in London.
LSE has added a former equities boss at Barclays to its board as it looks to quell fears about its health. Todd Sandoz has joined LSE as a non-executive director, a spokesperson for the London Stock Exchange Group confirmed.
His appointment follows ex-Morgan Stanley banker Stephen O’Connor’s departure at the end of last year after 11 years on the LSE board. Sandoz was chief risk officer at Hurricane Capital, a New York based multi-manager hedge fund.
He joined Hurricane in August 2023 after stepping down as global co-head of equities at Barclays that February. The UK bank hired Sandoz to lead its Americas equities unit in 2018 before putting him in charge of its wider stock trading operation in 2020.
Andy Jalil
The writer is our foreign correspondent based in the UK
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