When Clara Furse became CEO of the London Stock Exchange back in 2001, she spent a large part of her tenure fighting off takeover bids from US, Middle East and Europe, which saw the exchange’s share price head to £20 a share from £5 and back again. To the average market observer, she and her management team did not take London to the rest of the world; nor did it bring much in the way of overseas business to London apart from Italy’s Borsa Italiana, which provided modest pickings.
The Xavier Rolet 8-year dynasty between 2009-2017 saw the LSE’s business select another gear, as CEO Rolet provided the sales momentum, taking London’s premier exchange’s share price from circa £4 to circa £37. Since then, it appears that the LSE’s technology and its acquisition of Refinitiv for $27 billion in 2021 has provided the momentum for a significant bounce in its share price.
It has been accurately chronicled that London, in recent years, has surrendered some market share associated with mega-billion-dollar deals to New York, which is understandable, as New York has far greater access large global investors. Also, the adverse views attracted by BREXIT has had a negative effect on companies looking for public quotations in London. The Government must bear some of the blame for failing to use the potential benefits of BREXIT, such as lower taxation benefits and relief. The Government was also painfully slow in implementing softer regulatory requirements, despite a huge amount of work by the likes of Lord Hill, who published his recommendations from the UK Listings Review, which was launched by HM Treasury in November 2020. It is also fair to say that COVID19 severely damaged the prospects for a host of potential IPO deals across the global spectrum.
The large cap IPOS, which continue to head for New York, is taken as read. However, it must not be forgotten that there are a massive number of wonderfully innovative companies, especially technological operations, that have yet to receive the support, encouragement, and tender loving care they deserve to receive from the LSE’S AIM operations. The opportunities are wide-ranging. Aquis Exchange has illustrated the opportunities in bring some exciting companies to the public’s attention. There are so many more that need investment and finance.
Aquis Exchange’s thoughts on the future of IPOS and equity trading centre on the need for competition to drive innovation in markets and make them fit for purpose. Current market setup has been in place for decades and clearly hasn’t had the same level of disruption or embraced technological advances as much as others. If the UK wants the deep pools of capital and level of retail engagement there is available in the US, it needs to recreate the competitive landscape that it has between NYSE and Nasdaq.
How can this be achieved? The key part of rejuvenating our public markets is going to be focusing on the growth companies that will be the future of our economy. Is it surprising that a company the size of LSEG appears to be struggling to inspire the development for smaller dynamic growth companies? Perhaps the LSEG may be a victim of their successes over the last 50 years – but it’s clear we need something new to halt the current stagnation, and the incumbent cannot be the disruptor/challenger. Every sector needs competition to drive innovation and evolve; capital markets are no different. The only slight difference is that because it’s a regulated ecosystem, the regulator also needs to help rejuvenate a new and dynamic approach.
If London is going to reap the benefit of buoyant capital markets, equity trading and IPOS, it needs to up its game significantly. The approach needs to be bolder. The appetite for risk has dissipated to unacceptable levels. There must be a much stronger risk-reward approach. The retail investor is key to this weeping sore. In the US the retail investor has close to 40% of the market; the UK 10%. My case rests. The retail investor must be encouraged to play a leading role in capital markets as shareholders and investors. With increased retail participation comes great liquidity. A decent shareholder register is fundamental to organised and sound market practice. Aquis Exchange currently is the pioneer of this initiative. This initiative should be adopted by all exchanges in the UK. Without this bold approach, London, currently a decent flag bearer of financial markets, will start to drift into the abyss of anonymity. The cry to all is WAKE UP!
Alasdair Haynes CEO of Aquis Exchange drew a brilliant analogy on the dilemma of the London Stock Exchange. “BA took the Union Jack off its carriers to indicate it was an international airline. Virgin put the Union Jack on to its carriers to indicate it was not only international but PROUD to be British.” I say to all exchanges, there is plenty of terrific businesses to support and float in your own back garden. Please start to cultivate them more vigorously. It’s only the jam that will come from overseas operations."
