The Strength of London Stock Exchange Amidst Global Challenges

The head of the London Stock Exchange, David Schwimmer, has firmly dismissed claims that the U.K.'s primary stock market is on the verge of decline. Instead, Schwimmer emphasized that the London Stock Exchange is a robust, prosperous, and highly efficient market.

During a roundtable discussion, LSEG CEO Schwimmer reaffirmed that "the London markets function excellently." He attributed the recent scarcity of initial public offerings (IPOs) to natural market cycles and the prevailing global economic climate. Schwimmer confidently stated, "IPO markets open, IPO markets close, and they will undoubtedly resurface."

Regrettably, this year has witnessed a significant decline in average daily trade volumes on the City stock exchange. Trade volumes have plummeted by 38%, mirroring the decrease in IPOs from 26 during the first half of 2022 to only 18 in the corresponding period of 2023.

Such concerning figures have raised alarms among certain analysts. Charles Hall, the head of research at Peel Hunt, described the current situation as a "doom loop," characterized by low valuations, diminishing liquidity, investor withdrawals, and a lack of enthusiasm for IPOs.

In response to these apprehensions, Schwimmer contended that the decline in IPO activity is a consequence of broader macroeconomic circumstances rather than being exclusive to the London Stock Exchange. He asserted, "The macroenvironment is exerting its influence on markets worldwide."

While challenges persist, London Stock Exchange remains resilient and adaptable in the face of global headwinds. With strong fundamentals and an optimistic outlook, it is poised to navigate these uncertain times and emerge stronger than ever.

ARM's Decision to List in New York Raises Concerns for London Stock Market

The recent announcement by British tech giant ARM Holdings PLC to opt for a listing in New York instead of London has raised concerns about the attractiveness of the UK's main stock market for IPOs. Critics view this decision as evidence that companies are increasingly favoring the US over the UK.

David Schwimmer, CEO of the London Stock Exchange Group (LSEG), however, challenges this perception. While acknowledging the existing mythology around better valuations in the US, he asserts that London can offer competitive valuations as well. Schwimmer also highlights LSEG's own successful sale of £10 billion worth of stock this year, demonstrating strong liquidity.

Schwimmer attributes the preference for New York listings to "compensation practices" in the UK. He points out that executives at US-listed firms receive higher pay, making a US listing more enticing. Additionally, he criticizes the UK press for creating a negative perception of London's markets. He emphasizes the unique media and cultural environment in the UK compared to other markets and contrasts it with the less critical approach of US media towards ARM.

In response to skepticism surrounding ARM's recent IPO performance, Schwimmer observes that despite trading below its initial offer price, ARM has not faced similar criticism in the US market. This suggests that market dynamics and reactions differ significantly between the two countries.

Overall, Schwimmer's statement challenges prevailing beliefs about the advantages of listing in the US and emphasizes that London remains a strong contender in terms of valuation and liquidity. However, he acknowledges the need to address compensation disparities and address negative perceptions in the UK market.