It has been a painful year for the City of London.Thank you for reading this post, don't forget to subscribe!
Rising inflation and 14 consecutive rate hikes have roiled financial markets and triggered a struggle for stable ground, while a shuttered IPO market and a flood of companies in New York compounded the pain for dealmakers, bankers and executives. Is.
Negative headlines abound and the London Stock Exchange is plunged into a period of soul-searching.
But how bad is the situation really in the city of London? And is London out of recession?
city amThe new State of the City page is a key hub for following the trials and tribulations of the Square Mile and tracking the health of the city this year.
Exodus: London could lose more than thirty companies this year
London’s beleaguered bourse’s troubles have worsened as predictions suggest London is on track to lose 30 companies worth more than £100 million in a deal raid.
Thirteen companies have announced acquisitions this year and have already completed transactions, while seventeen more acquisitions or delistings have been announced and are awaiting completion, according to analysis by investment bank Peel Hunt.
Many small-caps below the £100 million threshold have also either gone private, closed down or announced plans to delist.
While the exit door is spinning, some precious big-ticket listings have gone the other way: The flow of CAB payments, considered a turning point, has badly unsettled some investors.
”The London market appears to be struggling to attract new listings, still under pressure from extremely strong competition from New York, the struggling UK economy and to some extent the Brexit impact.” Currency & Market head Susannah Streeter said city am,
“Meanwhile, the weak pound and pessimism in valuations have accelerated private equity activity and UK companies are increasingly becoming the target of M&A.”
Streeter said the takeover figures underline the growing grip on UK targets by foreign buyers, which “will undoubtedly create new unease among politicians” as ministers try to tempt more companies to list in London. .
UK venture funding ahead of European rivals
There may be light at the end of the tunnel for UK start-ups as venture capital investment began to increase in the third quarter, pushing the UK ahead of European rivals.
The UK remains the leading destination for VC investment in Europe, with $15 billion raised so far in 2023 and $4.9 billion added in the third quarter of the year, according to the latest data from HSBC Innovation Banking and Dealroom.
French start-ups raised $2.5 billion in the third quarter, while German companies raised $1.7 billion, ranking second and third in Europe, respectively. UK numbers have increased by 14 percent compared to the previous quarter and rank third globally behind the US and China.
Both companies found that top funding rounds between June and September reflected a trend towards hard tech, with £4.9bn allocated to early-stage investment so far this year.
Eye on Citi IPO
The decline in listings this year has hit the City of London hard amid a broader slowdown in the global IPO market.
The global IPO market saw 615 IPOs in the first half of the year, raising $60.9 billion, 36 percent less in value than an already quiet 2022, according to EY data.
However, London has felt the pressure more than others. While the number of floats started rising again in the second quarter of this year, the amount of cash raised is still sluggish.
New data from EY shows that cash raised through fresh listings on London’s historic stock exchange fell 36 per cent to £360m between June and September, as only five companies came to the market last year. This is down from £565.5m in the same period.
How the city piled up on the IPO
London has fallen out of the top 12 in terms of both cash raised and IPO volume in the first three quarters of the year.
While lawmakers and officials have moved to reform London over the past two years, companies are still looking to tap deep reserves of capital in Asia and the US rather than the city.
Even Istanbul and Bucharest have raised more cash, while Chinese and US markets have advanced.
How big is the London Stock Exchange?
Three exchanges operate in the capital, two operated by the historic London Stock Exchange, and one smaller exchange operated by challenger firm Aquis.
The cumulative value of the London Stock Exchange is £2.6 trillion. The combined value of the 100 largest companies listed on the Main Exchange is approximately £1.9 trillion.
Seems like a lot? But the value of those 100 largest companies was surpassed in July by only one New York-listed company: Apple.
How is the city progressing in terms of development
London is also plagued by sluggish valuations of its top companies. Much has been made of the premium price tags enjoyed by New York’s listed giants – and the five-year growth trajectories of the major indices on both sides of the Atlantic show just how wide this gap has become.
Big New York listed companies have made a splash, while European and London listed companies have been left in the dust.
VentureView: The pull of private markets?
Private markets have been seen as an increasingly attractive option by many companies this year. However, venture capital investment has been hit by an equally sharp slowdown globally, as the flow of cheap cash was blocked by rapid rate hikes.
London remains strong in the global rankings, but funding has slowed dramatically as venture investors look more closely at their targets.
For daily updates on the health of the Square Mile check out City AM’s state of the city