The London Stock Exchange (LSE) is facing a challenging year as it struggles to attract new floats and raise capital through initial public offerings (IPOs). According to analysis by Mergermarket, London’s main market is in joint-21st position for money raised by new floats in the first four months of the year, with only one IPO raising just £95m.
This puts London on par with the much smaller exchanges in Kazakhstan, a country with the world’s 54th-largest economy. The lack of IPO activity in London has caused the exchange to drop in global rankings, behind exchanges in Istanbul, Athens, and Oslo.
The London market has been hit with companies opting to list abroad in places like New York, with mining giant Glencore choosing to list its coal business in the US last year. There were also fears that FTSE giant Shell was considering a move, although the company has since played down the suggestion.
Despite the challenges, there are some signs of hope on the horizon for the London Stock Exchange. Companies like Boots, Starling, and Klarna are considering IPOs in the British capital, and fintechs like Zilch and Zopa are also eyeing potential floats.
Analysts are optimistic about the second half of 2024, with Peel Hunt expecting a “broader re-opening” in the first six months of next year. However, there are concerns about the uncertainty caused by an upcoming general election and the trend of companies leaving the UK market for the US or through acquisitions.
Lindsay James, investment strategist at Quilter, highlighted the challenges facing the UK market, including a scarcity of large growth companies and stringent regulations that may deter companies from listing. The London Stock Exchange Group (LSEG) made more than £7bn in profit in 2023, but just 3% came from the exchange.
Despite the challenges, an LSEG spokesman emphasized the importance of the London Stock Exchange within the group and its role in the global financial markets infrastructure. The spokesman stated that all entities across the group benefit from a diversified business model and strong balance sheet, enabling investment in growth and transformation.
Overall, the London Stock Exchange is facing tough competition and challenges in attracting new floats, but there are signs of hope for the future with potential IPOs on the horizon and optimism for the second half of 2024.
