After the drought, here comes the rain. Well, more of a light drizzle actually, but three flotations or float announcements in the space of a few days will be a relief for the parched London Stock Exchange.
The biggest is Shawbrook, a bank focused on buy-to-let mortgages and lending to small businesses. It was taken off the market in 2017 by a pair of private equity firms, BC Partners and Pollen Street, and should now return by the end of the year with a likely £2bn-ish valuation.
The timing is superficially odd because the talk is of higher taxes on banks in Rachel Reeves’s budget next month, but makes sense in other ways. Bank valuations have soared in the past 18 months, helped by a benign climate for bad debts and a backdrop of (slowly) falling interest rates. From the point of view of private equity sellers wishing to cash in a few chips, wider price-to-book valuations count for more than a possible tweak to bank levies.
Yet Shawbrook’s intended initial public offering (IPO) is exactly the sort that London should land every time. The US is not an option for a UK-only lender of £2bn size. It’s good that it is happening, but let’s not pretend that the wider weather has changed overnight. Much the same can be said of the Cheshire-headquartered Beauty Tech Group, a maker of LED face masks that debuted last week at £300m, and the Liverpool-based food business Princes, targeting a £1.5bn listing by the end of the month. In the old days there was a steady stream of such arrivals.
What have been more conspicuously missing are big, splashy arrivals of companies that have options on where to list. It is why SoftBank’s decision to choose the US Nasdaq market for $65bn Arm Holdings in 2023 was felt so keenly.
There is one possibility on the horizon that may fit the bill. Visma is a €19bn (£16.5bn) Norwegian software company, majority-owned by the private equity firm Hg, which reportedly has a preference for London over Amsterdam for its planned IPO next year. Given the size, that would represent a proper win. The reverse, of course, is also true: given the pre-publicity, it would now be a bad blow for London if Visma were to opt for any other venue.
Hopes were lower for Revolut, the most valuable UK fintech firm, until the Sunday Times reported recently that the novel idea of a dual listing in New York and London, with enough of a UK flavour to allow entry into the FTSE 100 index, was under consideration. With the suggested £55bn price tag, Revolut would genuinely change the mood.
London needs all sizes of new listings, of course – the domestic operators and internationally active multibillion operators. But it’s the latter, inevitably, which creates more buzz.
Reeves, trying to promote the virtues of London as a destination, must know by now that the single biggest change she could make would be to cut the UK’s uncompetitive regime of charging 0.5% on share purchases. A three-year holiday for new listings is said to be under consideration. That’s better than nothing but not as helpful as a cut for all transactions. Either way, if there are tentative signs of a revival in the IPO market, the chancellor should use the moment to add some momentum.