London's stock market is experiencing its worst period since the global financial crisis. The number of companies delisting or moving their listings away from London has reached its highest level since 2009. The number of initial public offerings (IPOs) is also at a 15-year low. Companies are leaving London, drawn by the higher growth potential and abundant investment capital in the US market. Donald Trump's "America First" policy is expected to further accelerate the exodus of British companies to the US.
Despite the UK government's efforts to enhance the attractiveness of its stock market through market regulation reforms, it has been unable to stem the tide of departing companies. Ashtead, an equipment rental company with a market value of £23 billion, announced last week that it plans to move its listing to the New York Stock Exchange.
Other major companies like Flutter, an online gambling company, and CRH, a building materials company, have already listed on the New York Stock Exchange. A total of six companies from the FTSE 100 index have moved their listings overseas since 2020, representing a combined market value of £280 billion.
Charles Hall, research director at Philhant, a UK brokerage, warned that the UK market needs nurturing and support to succeed in an increasingly globalized market. Otherwise, more companies will leave.
The primary reasons for the exodus of British companies include the high growth potential of the North American market and the abundance of investment capital. Ashtead and Ferguson plc, a plumbing equipment distributor that moved its listing in 2022, generate 98% and 99% of their operating profits in the US, respectively. Nine companies in the FTSE 100 index generate more than half of their revenue in the US.
A London-based bank executive predicted that more fast-growing companies will move their listings to the US next year. "The US is now a much larger capital market than anywhere else, so people generally think they can get a better deal there," the executive said.
The Financial Times analyzed factors such as valuation relative to US peers, US revenue exposure, and the proportion of North American investors and found that London-listed companies are at the highest risk of moving to the US among European stock exchanges. Companies such as Rio Tinto, one of the world's largest mining companies, and American Tobacco have been mentioned as potential candidates for a move. Activist hedge fund Elliott Capital recently called for Rio Tinto to delist from the London Stock Exchange.
The CEO of a FTSE 100 company told the FT that Trump's "America First" policy could accelerate companies' delisting plans. Goldman Sachs said on December 13 that more UK companies are considering moving their listings to the US and that the valuation gap between the UK and the US has widened.
LSEG stated that the UK market is currently the third-largest market globally in terms of capital raised and is witnessing one of the most dynamic reforms in the world. The FTSE 100 index rose 7.33% this year, while the US S&P 500 gained 26.86%.
[Copyright (c) Global Economic Times. All Rights Reserved.]
