London's IPO Market: A Slow Corrosion

The City of London, once the epicenter of global finance, is facing a slow corrosion in its IPO market. Despite the FTSE 100 hitting record highs, the number of companies listing on the London Stock Exchange has plummeted to its lowest level since the global financial crisis. This stark contrast between market performance and listing activity raises critical questions about the health of the UK's capital markets and the broader implications for the country's economic future.

The decline in London IPOs is a multifaceted issue, rooted in a combination of geopolitical instability, economic uncertainty, and regulatory challenges. The UK's stock market exodus, with companies like Flutter and Arm Holdings opting for US listings, has further exacerbated the problem. This trend is not just about companies seeking deeper capital pools; it reflects a broader erosion of trust in the UK's financial ecosystem.

The slow corrosion of London's IPO market is not a new phenomenon. In 2021, the London Stock Exchange saw a stellar year with the best number of new issues and capital raised since 2014. Deliveroo's IPO raised £1.5 billion at a £4.9 billion valuation, and Oxford Nanopore achieved a £4.8 billion valuation in its London IPO later that year. However, since then, the market has been in a steady decline. Only one company, Ithaca Energy, has listed with a valuation of more than £550 million in the interim, and even that was a disaster, with Ithaca's shares down 43% since its November 2022 IPO.

The downturn in London's IPO market is closely interrelated with the broader trend of companies delisting or transferring their primary listing from the London Stock Exchange. In 2024, 88 companies delisted or transferred their primary listing from the main market, citing declining liquidity and lower valuations compared to other markets. This trend is a clear indication of the challenges facing the UK's capital markets and the need for urgent reform.

The potential IPOs of companies like Shein, RC Fornax, and Ebury in 2025 could provide a much-needed boost to the London IPO market. Shein, the Chinese fast fashion giant, could bring a $66 billion valuation to the FTSE, bolstering market sentiment and attracting more investors. However, Shein's IPO is marred in controversy over accusations of exposure to cotton sourced from Xinjiang, a region where forced labor is used in some industries. This controversy highlights the ethical dilemmas facing the London Stock Exchange and the need for greater transparency and accountability in the IPO process.

The potential IPOs of companies like RC Fornax and Ebury could also have a significant impact on the London IPO market. RC Fornax, a defense sector consultancy, is planning to list on London's AIM market in February, with an expected valuation of £5 million. Ebury, a British payments startup backed by Spanish bank Santander, is planning to float on the LSE with a potential valuation of around £2 billion. These IPOs could increase market activity and diversify the London IPO market, making it more resilient and appealing to a wider audience.

However, the success of these IPOs will depend on a range of factors, including regulatory support, market sentiment, and the ability of these companies to navigate the challenges and controversies surrounding their listings. The UK government's initiatives to revive UK capital markets, led by Chancellor Rachel Reeves, could provide the necessary support for these IPOs to succeed. A robust deals pipeline, improved domestic policy environment, and listings reform are expected to drive a rebound in activity in H1 2025.

In conclusion, the slow corrosion of London's IPO market is a complex issue that requires urgent attention. The potential IPOs of companies like Shein, RC Fornax, and Ebury in 2025 could provide a much-needed boost to the market, but their success will depend on a range of factors, including regulatory support, market sentiment, and the ability of these companies to navigate the challenges and controversies surrounding their listings. The UK government's initiatives to revive UK capital markets could provide the necessary support for these IPOs to succeed, but it is clear that more needs to be done to address the underlying issues facing the London IPO market.