Neighbourhood watch: Keeping a close eye on the London Stock Exchange
Public equity markets matter: not just for prestige, but as a vital part of a thriving economy.
In the last couple of years, London’s exchanges – particularly the flagship bourse, the London Stock Exchange – have been under scrutiny like never before.
A rising number of take-privates, increasing complaints about underperforming share prices and concerns about price to earnings discounts have been the subject of many a lunchtime discussion.
We’re trying to track just how ‘bad’ it is – and whether there’s still hope for the capital.
Bigger and better?
It used to be the case that London compared itself solely with New York, but no longer. As our chart shows below, London has slipped well into the second tier when it comes to global markets – with both the New York Stock Exchange and the NASDAQ well ahead of the London Stock Exchange.
A closer look at London doesn’t do anybody any favours, either. Indeed the exchange’s market cap is now smaller than it was in 2013, as firms bail out for private hands or fail to add value.
The number of companies on the exchange has fallen significantly in recent years. In 2023 alone, more than 30 £100m-plus companies headed for the exit door.
It’s not getting any better…
This year has started with a host of other take-privates, both announced and potential.
Amongst the most notable are Wincanton’s plans to go private.
Other takeovers, not so well advanced, could include a bumper megadeal seeing listed French firm Mondi take over fellow listed rival DS Smith, another reduction.
Filling the gap
It’s one thing firms exiting the exchanges – that’s part and parcel. But the pipeline of firms coming in to the exchange has gummed up significantly – with London beaten by once ‘notspots’ like Istanbul last year in both value and number.
Keeping it liquid
One real issue for the London Stock Exchange is a substantial fall in liquidity and volumes of trading.
And one look at the scale of buybacks amongst America’s largest firms versus the UK’s tells a very clear picture, too
So what’s next for the London Stock Exchange?
Both regulators and Whitehall are under pressure to move faster on listing reforms, with reviews by senior City grandees including Mark Austin and Rachel Kent now gathering dust.
One thing’s for sure – something has to change.