The London Stock Exchange has shown signs of life this year as new figures revealed the capital had surged ahead of European rivals in terms of cash raised by listed companies.
Firms listed on London’s embattled exchange raised some £14.6bn in follow-on equity issuance in the first nine months of the year, where listed firms raise cash by issuing more shares to the market, according to new figures from PwC. The figures put the City (the financial district of London) ahead of European rivals and cast a more positive light on London’s markets after a torrid 18 months for fresh listings.
IPOs have fallen sharply over the past two years as volatility rocked the market and frightened investors. Figures from EY in early October found that firms raised just £953m in the first nine months of the year compared with 34 IPOs raising £1.16bn in the same period in an already quiet 2022.
London was surpassed by the likes of Budapest and Istanbul in the IPO rankings. Analysts at PwC said overall activity “remains subdued” this year despite follow-on cash in London topping its rivals. The new numbers were cheered by City minister Andrew Griffith, however, who said life was returning to the market.
“At a time of low issuance across markets in general, these figures confound the declinists and show that London continues to be resilient,” he said. “And as the benefit of our reforms kick in, including those boosting demand for UK listed equities – I am confident we will see more new and follow-on capital raised here.”
London has been plunged into a period of introspection this year as London Stock Exchange officials and regulators look to overhaul the market and boost the flow of listings. Ministers and London Stock Exchange officials have been looking to strip back red tape from the market with measures like slimming down the prospectus regime for new firms and merging the standard and premium segments of the market.
A number of firms have fired barbs at the City over the past year amid a dearth of capital flowing into the stock market. Turkish soda ash firm WE Soda ditched a London float over the summer and criticised what it called the “conservatism” of London’s investors.
Analysts at PwC said the new numbers showed “some aspects of the European equity market have normalised” as London firms could dip into the pockets of investors again.
“This points to one of London’s recurring attractions being the depth of liquidity that is available and also signals investor appetite for equities,” said Kat Kravstov, capital markets director at PwC UK.” He added: “That is certainly helpful in the context of providing a supportive environment for IPOs and we would expect this to feed through into a London IPO market in due course.”
Additionally, top Venture capital (VC) firms last week threw their weight behind a move to channel pension cash into startups as the government accelerates its effort to get more retirement money flowing into the economy.
In an announcement, 20 venture firms including Octopus, Balderton and Lakestar said they had signed a new “Venture Capital Investment Compact” backed by the Treasury, which would help unlock “£50bn to flow into unlisted companies by the end of the decade.
The new announcement follows a move by nine of the country’s top pension money managers over the summer to commit five per cent of their assets to startups by 2030. Pension money has typically been shut out of private markets due to the higher costs charged by money managers at VC and private equity firms. However, backing for the plans from some of London’s top venture capital investors may now unlock a viable channel for pension money to flow into startups. (The writer is our foreign correspondent based in the UK)
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