8th Jun 2023 12:09
(Alliance News) - A recent revival of initial public offerings in London's equity markets is encouraging evidence that the city still holds appeal on the global stage, analysts contended.
However, London Stock Exchange needs to "modernise" to stay successful, and market participants should brace for further volatility.
CAB Payments on Thursday announced its intention to float in London. It is a London-based business-to-business cross-border payments and foreign exchange provider, specialising in emerging markets.
"Its decision to launch an IPO in London will help add shine to the capital's reputation as a fintech hub," said Susannah Streeter, head of Money & Markets at Hargreaves Lansdown.
Edison CEO Fraser Thorne said London is "still attractive", despite some recent blows, as high-profile names like Arm Ltd and CRH PLC turn to New York rather than the City.
"London has the deepest pool of international capital, a near unrivalled high-quality advisory community and sell-side research coverage, a fair regulatory environment and world-class market surveillance," Thorne contended.
The news about CAB Payments follows a recent boost for London, after the world's largest natural soda ash producer, WE Soda, confirmed its intention to float on the premium segment of the London Main Market on Wednesday.
The firm is the world's largest natural soda ash producer. It is based in London with production facilities in Turkey.
London offers an "excellent destination for emerging market players", such as WE Soda, "which is seeking global market access from a European base", Edison's Thorne continued.
Last week, the Financial Times reported WE Soda's owner, Turkish industrialist Turgay Ciner, is targeting a valuation of around USD7.5 billion, which would be enough to be included in the FTSE 100. The newspaper cited people "familiar with the matter".
It would be the largest listing in London since GSK PLC's consumer healthcare spin-off Haleon PLC, which debuted with a market value of around GBP30 billion last July.
International specialist fund Amicorp FS also began its first day of trading on Thursday, joining the standard listing segment of the Main Market.
"The last two years have provided a skewed perspective on London's strength as a financial capital. Following the 2021 IPO boom, where a record GBP49 billion was raised (with mixed outcomes, to say the least), 2022 saw a swing towards economic difficulties in the UK market," Thorne recalled.
2021 saw Deliveroo PLC, Petershill Partners PLC, Dr Martens PLC, Oxford Nanopore Technologies Ltd and Darktrace PLC among those listing on London's Main Market.
"2023 may well be a slight return to normality after these turbulent years."
HL's Streeter said: "After the drought of IPOs in the capital, the taps are now being slowly turned on and the flotation tank is starting to fill, but don't expect the trickle to turn into a flood just yet."
"Although a greater sense of calm has returned to the markets following the jitters caused by the banking sector scare in the Spring, there is still uncertainty about the direction of interest rates which could still provoke unsettled trading going forward," she continued.
The Bank of Canada defied expectations and lifted its benchmark rate on Wednesday, following in the footsteps of the Reserve Bank of Australia a day before.
Having largely expected rate hike pauses, equity investors are now re-evaluating the potential trajectory of interest rates across the globe. They are now increasingly pricing in the possibility that the monetary tightening cycle will continue in major economies.
To Edison's Thorne, further successes for London's equity markets will depend on "constant evolution and modernisation".
"More can be done to enhance the exchange's attractiveness. Lord Hill's reforms and the current measures in the FCA's consultation paper, such as proposing a single listing category and a more permissive approach to dual-class shares, are welcome."
Two years ago, Jonathan Hill chaired the UK Listing Review, which began the process of trying to improve London's markets.
In early May, the UK Financial Conduct Authority said it is proposing "significant" changes to the listing rulebook, including replacing its existing standard and premium listing segments with a single category for equity shares in commercial companies.
The financial watchdog said a single equity category would remove eligibility requirements that can deter early-stage companies, be more permissive on dual class share structures, and remove mandatory shareholder votes on transactions such as acquisitions to reduce frictions to companies.
By Elizabeth Winter, Alliance News senior markets reporter
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