London’s public companies are looking to New York as a preferable market for listing their shares, with City dealmakers handling frequent inquiries from clients asking how they could shift across the Atlantic.
Just this week, it was revealed that two major companies had picked the U.S. for their main listings ahead of London — CRH Plc, one of Europe’s biggest building materials companies, and Softbank-owned Arm Ltd., a jewel of Britain’s technology industry. It was the latest blow to the U.K.’s Conservative government which says it’s determined for London to prosper post-Brexit.
One senior banker said a shift in listings away from London has become the most common talking point among companies, and nearly all their clients with main revenue streams outside Britain were considering a move. Even some members of the benchmark FTSE 100 index are thinking about transferring their listings to New York, according to people with knowledge of the matter, who asked not to be identified discussion private information.
“Unless London can be restored to its position as a default financial center,” said Oliver Lazenby, a partner at Freshfields Bruckhaus Deringer LLP, “then the trend away from London, and in particularly toward New York, will likely continue.”
Lazenby is advising $27 billion gambling giant Flutter Entertainment Plc which said last month that it’s preparing a secondary U.S. listing. He’s also advising biopharmaceutical company Indivior Plc on its pursuit of an additional listing in the US.
Freshfields is “speaking to several other companies about this,” Lazenby added.
Almost four years ago, more than half of Flutter’s shareholders were based in the U.K., and about a quarter in the U.S. Today, less than a third are based in the U.K., while the U.S. has climbed to 43 percent. A U.S. listing could push this number higher still.
Peter Jackson, Flutter’s chief executive officer, said he’d met large potential U.S. investors who were concerned about the amount of liquidity in the betting company’s stock in the U.K.. “This isn’t an issue which is unique to us,” he said. “It’s a London phenomenon in comparison to America.”
Flutter has initially asked shareholders for permission to pursue a partial listing in the U.S., but said the door is open for moving its primary listing there too.
More Capital, Higher Pay
Higher valuations, access to deeper capital markets and less scrutiny of executive pay are key reasons to look to the US.
“The ability to attract and remunerate senior management has been one, but clearly not the only consideration,” said Paddy Evans, head of U.K. equity capital markets at Citigroup Inc. “Empirical evidence supports this.”
The London market is facing threats from multiple directions. U.K.-listed companies are increasingly targeted by U.S. buyout funds and other investors seeking to take advantage of a weaker pound and depressed valuations. As companies decide to stay private for longer and IPOs remain far and few between, the loss of established listed companies is an added blow.
“Post the global financial crisis, the world’s seen this explosion in the depth of private markets where companies are staying private for longer,” said Stephanie Niven, portfolio manager at Ninety One UK Ltd. “That has meant that companies are becoming bigger when they IPO and therefore they’re more likely to head toward the U.S.”
In 2021, Shell Plc’s executives explored moving the company’s stock market listing and headquarters to the U.S. from the U.K., the Financial Times reported this week — a move that would have sent shock-waves through corporate Britain.
In the same year, plumbing and heating products group Ferguson Plc moved its primary listing to the U.S. after trading as a FTSE 100 company.
A string of moves have been announced in recent months. Ascential Plc, the London-listed data-and-analytics company, said in January it was planning a separation and listing of its digital commerce assets in the U.S., as part of a strategic review.
Abcam Plc, a Cambridge-based biotechnology company worth about $3.3 billion, moved its primary listing away from London to the Nasdaq last year. Its shares have drifted almost 7 percent since then, however.
Mining giant BHP Group last year scrapped its top-tier quotation in the U.K. in favor of a primary listing in Australia.
Steady Decline
The size of the U.K. stock market has been shrinking over the past 16 years. The total market capitalization of London-listed equities fell from a peak of $4.3 trillion in 2007 to about $3 trillion this year.
The U.K. lost its crown of Europe’s largest stock market to France last year, another blow to the dominance of British finance. As a comparison, the U.S. stock market more than doubled in size over the same period, growing its total market capitalization from $19 trillion to $43 trillion, according to data compiled by Bloomberg.
Justin Gover, the founder and former CEO of GW Pharmaceuticals Plc, pursued a dual listing in New York in 2013 and in 2016 canceled the London listing altogether. Almost 94 percent of the trading was on the Nasdaq, where it had managed to raise around $800 million.
The amount of capital the company wanted “was of a scale that frankly we thought would be impossible to achieve in the London markets,” Gover said.
Reverse Mergers
While defecting to the U.S. comes with potential advantages, it’s not an easy process. Moving a primary listing from the U.K. requires the consent of about 75 percent of shareholders and the loss of a U.K. company could be a blow for U.K. managers whose mandate prevents them from buying overseas-listed stocks.
One option to smoothing the way is a reverse merger with a U.S.-listed company. Some executives are also thinking of outright acquiring U.S.-listed firms to get a shareholder base which is predominantly from the country.
“We talked to investors years in advance that this was the eventual game plan,” said Tessa Bamford, a former non-executive director at Ferguson, previously known as Wolseley Plc. The company also changed its reporting from pound sterling to dollars, as the majority of its profits were made in the U.S.
However, breaking into the U.S. is not easy. Despite moving its listing last year, Ferguson has not yet been adopted into a U.S. index, such as the S&P 500.
“It is clear that it is not appropriate for all companies,” added Citigroup’s Evans.
