London's efforts towards making its stock market a lucrative option for fast-growing tech firms to compete with New York counterpart is reportedly facing setbacks due to low trading volumes and some high-value IPOs falling flat.
Over the past week, Britain introduced new rules that made listing seem more attractive to technology companies. This was done by repealing the ‘one share, one vote’ regulation and allowing founders to execute a premium listing - which enables access to FTSE indices - while retaining majority control in the company.
Finance minister Rishi Sunak had promised earlier this year that the new regulations would be aimed at making London more competitive after the U.K. exited from the European Union. As a result, a number of firms floated on the London exchange, anticipating a much smoother listing process.
Sources have claimed that during the first eight months of 2021, 38 companies got listed on London's exchange to raise a capital of USD 16.87 billion, which is the highest since 2015.
However, some big-ticket IPOs of companies like Deliveroo and THG have been trading substantially lower than their listing prices, as investors are choosing to avoid companies in which voting rights have been outsized.
Analysts say that the IPOs fell as several of them were e-commerce firms that had calculated valuations based on pandemic-era demand, which reduced as Britain removed lockdown restrictions in 2021.
Liquidity issues were also cited to be an obstacle, as experts stated that the London exchange cannot generate the mass appeal which New York Stock Exchange and Nasdaq IPOs have.
It is worth noting that the average monthly turnover for U.S. stocks was USD 560 billion in 2021. In comparison, European stocks account for USD 78 billion on average and British stocks sit at just USD 16 billion monthly.
Despite the marked improvement in Europe and U.K. markets, the U.S. stock exchange still boasts of one of the fastest-growing indices in the world.
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