London is still Europe's top equity capital market
The City's real rivals are further afield
The London Stock Exchange is still the preeminent exchange in Europe for equity capital raising, despite plenty of soul searching among regulators and UK politicians about the City’s ability to attract hot companies to its stock market following Brexit.
A lot of noise has been made recently about London’s decline relative to other European exchanges such as Amsterdam and Frankfurt, which have made significant strides in terms of attracting initial public offerings, particularly those of fast-growing technology companies and blank cheque vehicles.
Perhaps to counter the anxiety, UK regulators have sanctioned an overhaul of the listing rules following the completion of the Hill Review in the spring. These reforms include allowing dual-class shareholder structures, which allow company founders to maintain outsized control, and smaller free float requirements on the premium segment. Companies such as Deliveroo and The Hut Group, which have dual class shareholder structures, could already list in London, but they were not permitted on the premium segment, or eligible for inclusion in the FTSE UK indices.
In addition to the listing rule reforms, the FCA has also brought in changes to allow US style special purpose acquisition companies, which have become wildly popular over the past eighteen months, to list in London. UK reverse takeover rules previously made the investor friendly US style Spacs impossible.
But regardless of efforts to play catch-up with other exchanges on listing rules, London’s position as the top exchange in Europe for equity capital raising in Europe appears unassailable, eight months into one of the busiest years ever for ECM activity globally.
Just over $46.2bn has been raised in London this year across all ECM product categories, according to Dealogic data. That compares to Frankfurt’s $27.9bn, $16.1bn in Paris and $14.4bn in Amsterdam, the data shows.
London is also the top European bourse for IPOs this year, with $16.7bn raised via 77 transactions, including flotations on the Alternative Investment Market (Aim), edging out Frankfurt, where $11.2bn has been raised across the same period.
This is not what decline looks like.
London still offers one of the deepest pools of institutional capital in the world, which is highly attractive to foreign companies, and a premium listing on the London Stock Exchange remains a gold standard for corporate governance around the world.
The decision by Olam International, the Singaporean agricultural commodities trader, to list its food ingredients business, a company with annual revenues of over $2bn, on the main market of the LSE this autumn is surely a sign that the UK remains a natural home for international businesses seeking a listing.
Even Deliveroo, which had a disastrous debut following its £1.5bn flotation at the end of March, is now trading above its IPO offer price as of Tuesday.
Arguably, London’s real rivals are not and never have been Amsterdam and Frankfurt, but Hong Kong and New York, which both have much larger domestic markets behind them. After the United States, China and the Hong Kong SAR, the UK is the fourth largest IPO market in the world this year.
The changes to the listing rules may well help close this gap, as well as other innovations, such as Wise’s direct listing in July, the first by a technology unicorn in London. Any concerns about London’s competitiveness versus the rest of Europe appear to be overstated.