The announcement that Deliveroo will pursue a London listing in the first half of the year, valuing the food delivery firm at around $10 billion, gave the City a much-needed financial fillip.
Lord Jonathan Hill, who published his review of the UK listings regime last week, said it was “great news” a firm born and bred in Britain had plumped for a domestic stock sale.
But one swallow does not make a summer. In Hill’s recommendations, the British peer and former European commissioner for financial services noted that London accounted for just 5% of global initial public offerings (IPOs) between 2015 and 2020.
As Euromoney wrote last week, the number of companies listed in London has fallen by 40% since its peak in 2008.
The harsh truth is that the global IPO market is now a two-way fight for supremacy that pits the US against China. The rest of the world picks up the scraps.
As ever, data doesn’t lie. In the 18 months to the end of February, 810 companies listed shares on Nasdaq and the New York Stock Exchange (NYSE), collectively raising $281 billion.
The US’s big bourses ranked first and second in both number of IPOs and volume of capital raised during that period, with Nasdaq leading the way.
Now look at China. Collectively, the main boards in Shanghai and Shenzhen, the newer Star Market and ChiNext, plus the Hong Kong Stock Exchange, completed 674 IPOs during the same period, raising a total of $125 billion.
Hong Kong was the world’s third-largest IPO destination, followed by Shanghai-based Star Market. The Shanghai Stock Exchange and the Nasdaq-style ChiNext based in Shenzhen were ranked sixth and seventh.
Sometimes, even New York’s power-bourses can feel a little second-rate
The mainland quartet was split by Saudi Arabia’s Tadawul exchange, which gate-crashed the list courtesy of oil major Saudi Aramco’s world-record $29.4 billion IPO.
London limped in eighth, making it the highest placed non-US/non-Chinese bourse on the list.
That three of the five exchanges that follow are Asian – hailing from Thailand, India and China again – merely offers further proof that primary capital markets are splitting to the east and the west, leaving Europe behind.
Removing Aramco for a moment, for the purposes of balance, seven of the world’s eight largest IPOs during the past 18 months took place in either the US or China, led by the likes of video-sharing mobile app Kuaishou and Airbnb.
Sometimes, even New York’s power-bourses can feel a little second-rate.
Expand the search function to include follow-on offerings, and China dominates, with only Aramco and Pershing Square Tontine Holdings, a special purpose acquisition company (Spac) that raised $4 billion on the NYSE in July, making the top-10 during the past 18 months.
Forced delisting
And it remains to be seen what, if any, impact the move by US regulators to forcibly delist any mainland firm with alleged links to China’s military will have.
The telecommunications trio of China Mobile, China Unicom and China Telecom were suspended from trading on the NYSE in January. The delisting of oil producer CNOOC began at the end of trading on Monday, with Beijing software firm Luokung facing removal from Nasdaq by March 15.
In the last days of the Trump administration, four more Chinese firms were black-listed by regulators, including smartphone maker Xiaomi, whose shares trade over the counter in New York.
For years, many of China’s best young tech firms chose to sell shares in New York for a variety of reasons, from the sophistication of investors, to a desire to get personal wealth as far away from Beijing’s prying eyes as possible.
But how long will that remain the case?
With the Star Market and ChiNext on the rise, and China’s economy set to be one of the fastest growing anywhere in 2021, global – including US – capital is making a beeline for mainland securities that offer outsized returns.
Beijing’s last-minute decision to axe Ant Group’s planned $34.4 billion Hong Kong-Shanghai IPO in November grabbed global attention for a number of reasons. But lost amid the hue and cry was the fact that a Chinese stock sale, set to be the world’s largest before its cancellation, had nothing to do with New York’s big bourses at all.
Eastward drift
Evidence of this eastward drift seems to emerge almost daily. Beijing spent the past year, while the world battled Covid, handing out new or expanded operating licences to an army of foreign investment banks and wealth and asset managers.
Many are busy bulking up their presence in the mainland, investing in office space, technology and human capital.
For now at least, it is hard to imagine New York losing its status as the world’s foremost listing venue.
But China, boisterous and bullish and determined to transform itself into a capital-markets power, is catching up fast. For everyone else, London included, despite Deliveroo delivering some much-needed good news, the outlook is far bleaker.
