British companies want to list anywhere but in London right now

A growing number of U.K. companies is ditching a home listing to go abroad, after a series of high-profile flops cast doubt on London’s campaign to attract startups and initial public offerings.

The U.K. is heading for its worst first quarter for IPOs since 2009, according to data compiled by Bloomberg.

The war in Ukraine and soaring inflation stoked volatility, denting investor confidence. But while companies in Italy and Norway managed to pull off large listings, London has seen only delays.

Buyout firm CVC Capital Partners is said to be considering listing in Amsterdam, where tech investment firm GP Bullhound floated a blank-check company this year. Sports-car brand Lotus may opt to list its electric-vehicle manufacturing unit in the U.S. or China, while SoftBank Group Corp.-backed Arm Ltd. and money-transfer business Zepz are said to eye Nasdaq IPOs.

“We are seeing a number of British tech and fintech companies look overseas to the U.S. for listings in search of deeper capital markets,” said Svetlana Marriott, a partner in KPMG’s U.K. capital markets group.

This trend is particularly painful in the context of the U.K.’s efforts to cast itself as the premier destination for tech companies in Europe. It rolled out a pandemic rescue fund for startups, changed the listing rules to allow founders to retain control of their businesses and lobbied some of the region’s biggest private firms to list in the City.

To little avail so far, however.

British startups have long gone to New York in search of deeper pockets and higher valuations. London, meanwhile, has notched up a string of flops from recent tech listings like food-delivery platform Deliveroo Plc, fintech Wise Plc and e-commerce firm THG Plc. Nearly all of last year’s top 10 biggest deals are trading below their IPO prices.

Buyer’s market
Years of underperformance mean valuations are cheap in Britain, making it an attractive market for buyers, but less so for issuers. Now, U.K. stocks are among the few winners. The FTSE 100 Index has gained 1% in 2022, compared with a 6.6% slump in the Stoxx 600 benchmark and the 12% slide in the tech-heavy Nasdaq 100 Index.

“For a number of years now, the U.K. market has suffered under the cloud of Brexit and the widespread misconception that it’s dull and mature,” said Andrew Millington, head of U.K. equities at abrdn plc. “But I think that is starting to change; we’ve seen the U.K. leading major indexes this year and the valuation gap has begun to narrow.”

To be sure, London remains Europe’s biggest hub for financial services, private equity, banking and venture capital. And IPOs worth billions of dollars are ready to tap the U.K. market in 2022, including Virgin Atlantic Airways, Olam International Ltd.’s food-ingredient unit and law firm Mishcon De Reya.

Electric car-battery startup Britishvolt, which has been considering going public in the U.S. through a blank-check merger, said last summer that London had become a more attractive destination after the overhaul of its listing rules.

“It’s too early to write off London,” said Simon Olsen, a partner in Deloitte’s equity capital markets group. “It’s the center of gravity and the biggest financial center in the region.”

© 2022 Bloomberg L.P.