London has an IPO problem. Recent weeks have seen a parade of news, from rumblings that AstraZeneca is considering moving its listing to the US to UK drugmaker Indivior cancelling its London listing.
The City is even struggling to hold onto its own bright stars: in June, British fintech darling, Wise, announced it would switch its primary listing to New York. Similarly, retail behemoth Shein is filing for an IPO in Hong Kong amid a drawn-out battle with UK regulators.
There are a number of structural reasons why CEOs’ and boardmembers’ eyes are wandering overseas, with people rightly pointing to Wall Street as the reason companies are leaving London out of their IPO plans. Higher liquidity, better multiples and a deregulated, growth-friendly environment are all strong pull factors for ambitious businesses. But these factors do not tell the whole story.
To revive London’s listing market, we must also face up to the push factors driving IPOs away and why we’re building so few companies that are ready for the public markets in the first place.
Reputation only gets you so far
London has an impressive reputation as a financial services hub – birthing unicorns like Monzo, SumUp and Revolut.
For too long, the City has relied heavily on that reputation and access to capital to maintain its position as an attractive location to build and list.
As market conditions become more difficult, operational discipline, agility and efficiency are vital to scale and survive. Yet many tech companies are still partying like it’s 2021, when money was easy, and have been too slow to adapt. They now lack the resilience to scale effectively as market conditions tighten.
As a tech hub, London has grown too comfortable resting on its laurels. There’s plenty of networking and schmoozing to be had, but that’s not being backed by action.
Success needs to be earnt
The culture is built for the good times, based on overconfidence (which is often necessary for funding) that bleeds into entitlement rather than driving people to put the work in. Left unchecked, London will never fulfil its potential. The tech reset will leave us behind – right when the opportunity is there to shape the future.
In the early 2020s, the halo of money and top talent around London made it an attractive place to be for the innovators of tomorrow. Now that light’s dimming, workers are looking elsewhere. London’s an expensive place to be and, if prestige, money and opportunity move on, top talent will too. With Paris recently overtaking London on speed of growth (and the US tech hubs knocking both into a tin hat) this narrative is already playing out.
Seeding not scaling
The UK’s problem is not lack of innovation. We’re still home to leading talent, our universities are the envy of the world and the founder community is as vibrant as ever. But we’re masters at seeding, not scaling ー and that’s why our IPO pipeline is broken.
If your financials are solid – strong growth, healthy margins, loyal customers and real market share – investors will be fighting to get in. The goal for UK plc should be building an ecosystem where exceptional businesses can flourish. London doesn’t need to chase listings, it needs to build more companies worth listing.
IPO is a privilege, not a right
In the soul-searching and sabre-rattling surrounding the loss of London listings, we must not forget that neither companies nor stock exchanges are entitled to IPOs. It should be hard to float – that’s why it’s one of the pinnacles of financial achievement and why it can yield huge rewards.
If a company can’t make it to IPO right now, they need to interrogate why that is and use the current challenges to refine their business model, internal structure and investor relationships. No business can do that if it’s refusing to acknowledge the realities of the market.
There is an undercurrent of entitlement and it’s undermining companies’ ability to compete. As more IPOs switch to other markets, London must take its share of accountability – and seek to fix the problems pushing tech and talent out.
Peter Richmond is co-founder of Cubed, an investment and advisory firm.
London has an IPO problem. Recent weeks have seen a parade of news, from rumblings that AstraZeneca is considering moving its listing to the US to UK drugmaker Indivior cancelling its London listing.
The City is even struggling to hold onto its own bright stars: in June, British fintech darling, Wise, announced it would switch its primary listing to New York. Similarly, retail behemoth Shein is filing for an IPO in Hong Kong amid a drawn-out battle with UK regulators.
There are a number of structural reasons why CEOs’ and boardmembers’ eyes are wandering overseas, with people rightly pointing to Wall Street as the reason companies are leaving London out of their IPO plans. Higher liquidity, better multiples and a deregulated, growth-friendly environment are all strong pull factors for ambitious businesses. But these factors do not tell the whole story.