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Potential Increase in Prestigious Companies Leaving FTSE Series?

Significant British businesses accounting for over half a trillion pounds in combined market value may exit the stock market, according to warnings from analysts.

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Potential Expansion of Blue-Chip Companies Leaving FTSE Index?
Potential Expansion of Blue-Chip Companies Leaving FTSE Index?

Potential Increase in Prestigious Companies Leaving FTSE Series?

In recent developments, several prominent British companies are contemplating relocating their stock market listings from the London Stock Exchange (LSE) to the US or other international exchanges. This shift is primarily driven by a combination of regulatory challenges, undervaluation of UK-listed companies, shrinking Initial Public Offering (IPO) activity, and the attractiveness of US capital markets.

AstraZeneca, the UK's largest quoted company, is considering shifting its main listing to the US, citing frustration with the UK’s regulatory regime, particularly for drugs, as a reason for the potential move. This highlights concerns that UK regulatory frameworks may be less business-friendly compared to those in the US.

UK companies are moving to more liquid markets abroad, with US buyers offering substantial premiums to acquire British companies. For instance, Alphawave’s sale to Qualcomm and Spectris' takeover offer demonstrate that American buyers are willing to pay significantly above the companies’ previous share prices on the LSE. This disparity incentivizes companies to shift where they are likely to achieve higher valuations.

The number of IPOs on the London Stock Exchange is at a historic low, with only 18 IPOs last year—its lowest since 2010. This contraction limits growth opportunities and the ability for companies to raise capital in London. The dearth of new listings combined with many companies delisting or relocating suggests a weakening of London’s stock market appeal.

Many British firms, especially in the tech and industrial sectors, have accepted takeover bids from US companies or private equity firms, resulting in the delisting of these companies from the LSE. The US stock markets are seen as more liquid, better valued, and more conducive to company growth and investor returns, which is driving companies like Wise and AstraZeneca to plan primary listings in New York.

Shell's boss, Wael Sawan, claimed the company was 'undervalued' compared with its US rivals such as Chevron and ExxonMobil. This sentiment is shared by others who have called for the Government to take urgent action to boost Britain's attractiveness on the world stage.

Rio Tinto, a copper giant worth £54billion, is under pressure from some of its investors to ditch London and shift its main listing to Australia. Only 19% of Rio Tinto's shareholders backed a motion to transfer to the Australian stock market at its annual meeting in April.

Diageo, the owner of Guinness, Smirnoff vodka, and Johnnie Walker whisky, has been the subject of takeover speculation. British American Tobacco, worth £77billion, could more than double its value if it switched its stock market listing to the US. Hip replacement maker Smith + Nephew could be a 'logical candidate' for moving to the US, where it generates more than half of its sales.

This shift poses long-term challenges to London's position as a global financial hub. Companies such as Flutter, whose gambling brands include Paddy Power, and Tarmac owner CRH are among a number of well-known firms that have already left the London market for New York. City broker Peel Hunt has warned that the situation presents a significant challenge for the UK economy in terms of jobs and taxes.

[1] The Financial Times [2] The Guardian [3] Sky News [4] BBC News

  1. The shift in stock market listings from the London Stock Exchange highlights the concern for UK companies, such as AstraZeneca, over business-friendly regulations and the attractiveness of foreign capital markets, especially the US.
  2. The frustration with UK regulatory regimes, combined with substantial premiums offered by US buyers, is driving many companies to consider relocating their listings, as demonstrated by the sales of Alphawave to Qualcomm and Spectris.
  3. As a result of the contingent plan primary listings in New York, companies like Wise and AstraZeneca are likely to achieve higher valuations, potentially undermining London's position as a global financial hub and posing a significant challenge for the UK economy in terms of jobs and taxes.

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