A cautious revival of the London IPO market

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The London Stock Exchange has had a disappointing few years. It has been devoid of any major initial public offerings since Deliveroo’s disastrous 2021 floating. Investors and market bosses have been let down, too, by a series of snubs and turnabouts, including former UK tech star Arm’s decision to list in New York and Turkish miner WE Soda’s last-minute withdrawal, both in 2023.

So it is with a measure of caution that many in the City have welcomed reports of three companies that appear set to list in London. Raspberry Pi, the British microcomputer maker, has confirmed a listing with an expected valuation of up to £540mn. Shein, the Singapore-based Chinese fast fashion conglomerate, is understood to be planning a London listing — and has reportedly been wooed by Labour and the Conservatives. Anglo American is also said to be considering an IPO of De Beers, the South African diamond giant, via the London market as part of a radical restructuring plan.

While all this would be a boost for the London market, it is not a perfect reopening. In the “vibes”-based IPO market, the company that tests the sluggish exchange will set the tone for those that follow. In an ideal world, a new era would have been ushered in by the listing of a homegrown tech star or earnings behemoth. Raspberry Pi does not exactly fit the bill, with a modest valuation and products that have limited use beyond students and hobbyists.

For Shein, by far the largest of the three, London was not its first choice. Rather, its earlier attempt at listing in New York was apparently rebuffed by anti-China sentiment. Its lustre is further dimmed by accusations of forced labour, and it remains possible that the Chinese Communist party could revoke its blessing. Market reactions to De Beers could vary, too, given its complex relations with the Botswanan government and questions over the sustainability of its business model.

However, this is the real world — not one where wishful thinking alone can create a British tech giant. Raspberry Pi and Shein IPOs ought to be celebrated. Market authorities and advisers should be dedicated to seeing their listings over the finish line. A De Beers listing is also worth encouraging, provided its sellers can address its business fundamentals.

The London market is currently experiencing some unaccustomed good feeling, and successful listings could shore up the positive mood. With a soaring FTSE and a flurry of opportunities for investors to snag shares through so-called follow-on transactions, investors are waking up to the fact that under-owned London companies are worth more than their current valuations.

The next government should seize on the momentum to foster a better fundraising environment. The recommendations of the Hill review should be acted on with more urgency. An industrial policy that invests further in critical technologies and removes impediments to new businesses would support the future supply of listable companies. Revising stamp duty could spur additional demand for UK equities, and better financial literacy education could help create new generations of local equity investors.

Regulators should be cautious, however, that the push for more listings does not detract from LSEG’s strengths. While Shein’s shift across the pond can make London appear to be less stringent than New York, London maintains world-class transparency standards. Regulators should not give in to the temptation to lower those standards to attract more listings. Doing so would jeopardise the London market’s historic role as the go-to location for emerging market companies, like Shein, to prove their international bona fides.

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