Another week, another blow to London’s capital markets. This time it was the turn of Wise, one of the UK’s brightest tech stars, which announced it would switch its main listing to New York.
The move by the £11bn fintech has put the City on fresh alert about the shrinking pool of listed companies and adviser fees in the Square Mile.
Advisory firms are now “making more money selling our businesses than listing them, which is devastating for the City from a long-term point of view,” said Charles Hall, head of research at Peel Hunt.
Wise’s announcement came hours after Cobalt Holdings, one of London’s rare listing hopes for this year, scrapped plans for an initial public offering. Just days earlier Indivior, the opioid-treatment arm spun out of Reckitt in 2014, also revealed it would switch its listing to New York.
But the shock exit of Wise has dealt a particularly heavy blow, and has led to wider questions about the ability of London to retain tech firms cultivated in the UK.
Wise, founded by Estonians Kristo Käärman and Taavet Hinrikus, was the standout success story from the rush of online-focused companies to go public in 2021.
Investors remain scarred by that disastrous vintage of listings, which included Deliveroo, dubbed the worst IPO in London’s history: its shares fell sharply and never recovered. Deliveroo is also leaving the London Stock Exchange after it accepted a £2.9bn takeover last month from DoorDash.
The majority of firms that listed in 2021 then crashed in value, while two — Made.com and In The Style — ended up in administration.
By contrast, Wise’s valuation has increased by a fifth since listing. As a result, one City adviser highlighted Wise could not complain about a valuation gap between London and New York. Nor could it use reasoning — as deployed by Ferguson, the plumbing group, or gambling giant Flutter — that it made the bulk of its revenues overseas because only a fifth of its business is in the US.
Even more disappointingly, Wise had been exploring in parallel a move to the FTSE 100 index, where it would have access to deeper liquidity from passive tracker funds.
But instead, the fintech has opted for New York, where it can maintain its dual-class share structure forever, rather than butting up against a five-year deadline, as is the case in London. Its decision comes less than a year after government reforms — including around dual-class structures — that were meant to encourage companies to list and stay in the UK.
“Wise is another wake-up call to the government,” said Peel Hunt’s Hall. “It chose to list here, it was going to become FTSE and instead voted with its feet.”
It is evidence that 2025 will not reverse London’s dire performance in 2024, when it suffered the worst year for departures since the financial crisis. A total of 88 companies delisted or transferred their primary listing from London’s main market, and only 18 took their place.
Already this year, Unilever has chosen Amsterdam over London for listing its ice cream unit, and challenger bank Shawbrook has paused plans while considering another route. What was meant to be London’s blockbuster £50bn listing from Shein this year is looking increasingly unlikely.
Two City advisers highlighted that the New York Stock Exchange had a bigger team of staff dedicated to poaching overseas businesses than the London Stock Exchange, which had focused on winning home grown firms. The LSE declined to comment.
“What the loss of Wise should do is spark a realisation in government that action is needed now, and not after another lengthy consultation, to encourage companies to start, list and stay in the UK,” said a senior employee at a company that is potentially listing in London.
During the first three months of this year, takeovers of listed UK companies outweighed IPOs three-to-one, according to AJ Bell research. In the year-to-date, just seven small to mid-market firms, including MHA and Achilles Investments, have listed, raising a total of £176.18mn.
Meanwhile, big departures have included cyber security firm Darktrace and Hargreaves Lansdown, the investment platform, both taken over by private equity firms.
Russ Mould, analyst at AJ Bell said: “Takeovers are coming thick and fast while IPOs remain scarce.”
That has an impact not only on London’s status, and the Treasury’s ability to collect stamp duty, but also on the wider ecosystem of City firms and advisers.
Simon Nicholls, co-head of corporate and M&A at Slaughter and May, said: “There are obviously fewer IPOs right now and that will clearly impact aggregate fees in that space. That scarcity can sometimes also create fee pressure around specific situations.”
Pressure is building. Earlier this month, Moelis put its London equity capital markets bankers on notice after a dearth of deals. The cuts come on top of similar warnings at RBC and shrinking equity capital markets teams at HSBC.
Julian Pritchard, head of global transactions at Freshfields, said: “We are currently working on more take-private transactions in London — which take companies off the market — than IPOs — which add them — but that is true of most markets across Europe and the US.”
However, he added that there was still a pipeline of IPO candidates that were just waiting for more settled markets to restore confidence.
Bankers are now pinning their hopes on the planned listings of Monzo, Ebury, Zopa, ClearScore and Zilch, although some of these could now slide into next year and beyond.
Mark Austin, adviser at Latham & Watkins and part of the Capital Markets Industry Taskforce — a group of City grandees pressing for reforms to revive the UK market — insisted that London was still the most attractive destination in Europe for listings.
“Wise is not a slight on the capital markets in London as it was fairly valued and at a premium to IPO and other tech stocks.” Austin believes London should go further with its reforms and make the dual-class structure permanent, rather than a 10-year deadline for entrepreneurial founders.
The Financial Conduct Authority, responsible for drafting the listing rules, declined to comment.
Austin is not alone in wanting the government to go faster.
There is also the long-running campaign for stamp duty to be scrapped on shares to foster more British ownership of domestic firms, although the Treasury relies on the billions of pounds it generates for its coffers.
The Treasury said in a statement: “The UK is Europe’s leading hub for investment and, through overhauling listing rules and creating a new stock exchange for private companies, we are driving reform to make the UK the best place for businesses to start, scale and list.”
Simon French, head of economics at Panmure Liberum, has called on the government to “grease the pipeline for companies” by offering the same tax incentives for main market listings as it does for Aim, London’s junior market.
Hall said: “We shouldn’t have to wait for the loss of a FTSE top 10 beast for the government to wake up and act.”