By Chris Dorrell
The City’s mission to address the sharp fall in listing activity was dealt another blow today after a Nasdaq executive claimed “a lot” of UK firms were calling the bourse with interest in listing on the US index.
Speaking to the BBC’s Today Programme, Karen Snow, global head of listing at Nasdaq, said “we’re having a lot of conversations with companies about listing in the US.”
“We get a lot of inbound calls [from the UK] and we also make sure we’re in front of the right CEOs,” she added.
Snow’s comments as the London Stock Exchange deals with a dearth of listings, which have soured the mood among the City’s chief financiers.
This year is likely to be the first year since records began in 1995 where the City’s bourse has failed to raise $1bn through IPOs, according to data from Dealogic. Nasdaq in contrast has raised $13bn.
The London Stock Exchange Group (LSEG) declined to comment.
Alasdair Haynes, chief executive of the Aquis Exchange told City A.M. that “the battle for today’s unicorns has already been lost, and if nothing changes we will continue to see large UK companies looking elsewhere.”
Snow suggested that the different valuations firms received went some way to explaining the difference.
“If you look at the way stocks trade in local markets versus the way they trade in the US there is a lot of discussion around potential valuation disparities, which I think is a very important component” when companies are considering listing.
However, recent research has cast doubt on the valuation gap between firms listed in the US and UK.
UBS’s James Arnold argued that the supposed discount between UK and US firms mainly derived from the outsized influence of the big tech giants, which have no equivalent in the UK.
When comparing UK firms with their closest equivalent firm in the US, the valuation gap all but disappeared.
UK firms do not always fare well when they do choose to list in the US. Only 23 UK Companies have IPO’d in the US in the last 10 years. Of those firms, six have already de-listed, 14 are trading down and only three are trading up, according to recent data from the LSEG.
“US markets are not the panacea that they have more recently been made out to be,” Mark Austin, partner at Latham & Watkins and author of many reviews into London’s capital markets, told City A.M.
“Our job in the UK is to make sure that we are match fit again and the obvious alternative to the US… it is about making sure issuers and investors understand what we have done to reform ourselves and, crucially, creating a positive narrative,” he continued.
The City is consulting on a slew of different regulations to streamline the listings process and encourage more domestic capital into UK equities.
Bim Afolami, the new City minister, also argued that UK-listed firms “outperform” their US-listed peers but stressed “by no means are we complacent”.
“We are strengthening the UK as a listing’s destination, taking forward reforms to make it quicker to list, improve disclosure and make our capital markets more efficient and open,” he told City A.M.
Haynes argued that the UK needed to develop competition between exchanges and encourage public money into growth companies, both things the US performs well at.
“If we can continue to do this, the UK will be able to create tomorrow’s markets for the next generation of companies and investors,” he said.
