Has The London Stock Exchange Lost Its Shine?

Concerns about the Initial Public Offerings (IPOs) in Europe were revived when Kaspi.kz, a Kazakh fintech group, postponed its floatation in the London Stock Exchange on 7 October, citing currently unfavourable and uncertain market conditions. The company which offers online payments and an e-commerce marketplace via an app was said to have valued it at $5 billion, and the floatation would have been the biggest initial public offering by a central Asian company since the global financial crisis in 2008-09. Amid uncertainty over the turmoil of the departure of the country from the EU, the listing would have been a boost for London, as more companies have left the main market of LSE this year than have joined. This was not a one-off case and indicated a broader trend that is emerging in the markets worldwide.

Many recent events indicate that the London market is gradually losing its shine. Mikheil Lomtadze, chairman of the management board, in a statement, said that the timing was not the best at the current moment for an IPO, despite significant interests shown by potential investors. The market for IPOs has been more difficult for technology companies since similar plans were scrapped by WeWork over lacklustre interest for its IPO, after which investors are looking at tech stocks with a bit more suspicion. This was a blow for the London-based bourse after Shore Capital a London stockbroker, announced its decision to delist from the exchange, claiming it was undervalued because of lack of trading volume, which was costing too much to maintain and was a distraction to management. A joint London and local listing that was expected to raise as much as $6.5 billion was postponed by KazMunaiGas in February, adding to the list of lost IPOs.

The recent events indicate that the crown jewel of the City of London is in decline, as the number of new listings has declined in the shadow of Brexit and trading volumes have been subdued. Experts reckon that the UK stock market is shrinking, as indicated by a combination of falling issuance, share buybacks and bids, and companies have been their backs on the UK equity market. Since Mifid II rules were applied that stockbrokers say has cut interest from investors, small and midsized companies have been complaining about the lack of liquidity in shares.

Even though, by proceeds raised this year, London is the largest market for initial public offerings in Europe and the city still dominates at the hub for equity finance in the region, still more companies left the bourse his year than have joined and many British companies with significant US earnings are looking to move out of the London Stock Exchange. High-interest listings of last year, like Funding Circle and Aston Martin, are down more than 70 per cent from their debuts, proving to be an embarrassing flop, and the exchange had only 25 IPOs by the end of September compared with 55 in total last year. Moreover, in contrast to £22 billion in 2018, fundraising has totalled £19 billion. Experts believe that part of the blame can be shifted to the uncertainties caused by Brexit, which has been shifted twice and shows no sign of resolution anytime soon. According to research from consultancy EY, as compared with 15 in the previous quarter, only four companies launched initial public offerings on the London Stock Exchange in the third quarter, raising a combined £329 million.

However, other factors also seem to be at play. International investors have largely shunned UK stocks, leading to depressed valuation, which also seemed to have put off potential listings, as investors and companies are in a wait-and-watch mode. As opposed to double-digit returns for France, Germany, and Europe as a whole, and 15 per cent climb in the S&P 500, the FTSE 100 in dollar terms has risen 5 per cent this year, while net equity supply was down by 3 per cent since the start of last year, which has led to lower liquidity. Listing plans are also getting derailed due to the possibility of the UK general election.

However, it has been a tough year for IPOs globally, as investors fret the rising risk of a global recession and increased scrutiny of listings by foreign government authorities. IPOs across Europe raised a total of €3.8bn across 16 listings in the third quarter, and the number of listings around the world dropped more than 25 per cent to 249 in the third quarter. Moreover, despite the recent rise in activity due to Varallia in France, EQT in Sweden and TeamViewer in Germany, volumes in Europe are at their lowest in seven years. However, London remained the desired destination for international issuers such as Finablr, Helios Towers and Network International, and the city is still admired by many companies, especially by companies from emerging markets. Moreover, experts say that the bourse is increasingly attracting companies from outside Europe and issuers were raising more capital.

Aston Martin Lagonda Global Holdings PLC (AML)

 Daily Chart as at 09-October-19, before the market closed (Source: Thomson Reuters)

 

The company was admitted to the London Stock Exchange on 3 October 2018, at an IPO price of GBX 1900, with a market capitalisation of £3.89 billion.

On 09 October 2019, at the time of writing (before the market closed, GMT 2:36 pm), AML shares were trading at GBX 438.6, down by 0.6 per cent against the previous day closing price. Stock’s 52 weeks High and Low are GBX 1,704.93/GBX 371.10. The market capitalisation was around £1.01 billion.

Network International Holdings PLC (NETW)

 Daily Chart as at 09-October-19, before the market closed (Source: Thomson Reuters)

 

The company was admitted to the London Stock Exchange on 10 Apr 2019, at an IPO price of GBX 435, with a market capitalisation of £2.60 billion.

On 09 October 2019, at the time of writing (before the market closed, GMT 2:41 pm), NETW shares were trading at GBX 519, down by 0.19 per cent against the previous day closing price. Stock’s 52 weeks High and Low are GBX 630.00/GBX 435.00. The market capitalisation was around £2.62 billion.

Trainline PLC (TRN)

 Daily Chart as at 09-October-19, before the market closed (Source: Thomson Reuters)

 

The company was admitted to the London Stock Exchange on 21 Jun 2019, at an IPO price of GBX 350, with a market capitalisation of £1.99 billion.

On 09 October 2019, at the time of writing (before the market closed, GMT 2:43 pm), TRN shares were moving at GBX 416, up by 1.71 per cent against the previous day closing price. Stock’s 52 weeks High and Low are GBX 522.80/GBX 350.00. The market capitalisation was around £1.98 billion.

Funding Circle Holdings PLC (FCH)

Daily Chart as at 09-October-19, before the market closed (Source: Thomson Reuters)

 

The company was admitted to the London Stock Exchange on 28 Sep 2018, at an IPO price of GBX 440, with a market capitalisation of £1.26 billion.

On 09 October 2019, at the time of writing (before the market closed, GMT 2:45 pm), FCH shares were trading at GBX 96.7, down by 1.02 per cent against the previous day closing price. Stock’s 52 weeks High and Low are GBX 440.00/GBX 90.00. The market capitalisation was around £342.22 million.

Finablr PLC (FIN)

Daily Chart as at 09-October-19, before the market closed (Source: Thomson Reuters)

 

The company was admitted to the London Stock Exchange on 14 May 2019, at an IPO price of GBX 175, with a market capitalisation of £1.20 billion.

On 09 October 2019, at the time of writing (before the market closed, GMT 2:47 pm), FIN shares were trading at GBX 140, down by 2.23 per cent against the previous day closing price. Stock’s 52 weeks High and Low are GBX 191.40/GBX 133.01. The market capitalisation was around £1.01 billion.