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The head of the London Stock Exchange Group has argued that companies going public in New York do not receive a higher valuation than they would in London, responding to the drift of listings away from the UK.
“The notion that you get a better valuation in the US, it’s a myth,” David Schwimmer said. “If you look company by company and adjust for growth rates and other factors, London is at, and in some cases higher, in terms of valuation [than the US].”
“We’ve done work on this, a number of banks have done work on this,” he told reporters on Friday.
Schwimmer was speaking as LSEG, which owns the London Stock Exchange, laid out its plans to transform into a financial data company, and as the UK attempts to stem the flow of UK businesses listing in New York, lured by perceived higher valuations and a deeper pool of capital.
This week, Glencore said it would list its planned coal mining spin-off in New York, despite natural resources companies traditionally being one of London’s strengths. Earlier this year, UK polling company YouGov said it was weighing a US listing, while Dublin-based packaging company group Smurfit Kappa is switching its primary listing from London to New York, saying it would achieve a higher valuation there.
“Investors in the US are very eager to buy this cash-yielding company and we believe we would get a better valuation for this business in New York than we would in London,” said Gary Nagle, chief executive of Glencore.
Schwimmer said on Friday “each company will have their own reasons” for picking New York instead of London. “In some cases it has been around compensation practices . . . One or two of the ones that have done this year have made some comments about the criticism that they would get for compensation here that they wouldn’t get in the US,” he added.
“With respect to liquidity, LSEG itself, we’ve sold over £10bn of our stock this year with no problem from a liquidity perspective so it is a very healthy, very successful, very well functioning market,” Schwimmer said.
UK policymakers are scrambling to make London’s capital markets more attractive and to encourage pension fund investment in domestic businesses, with measures expected in the UK’s Autumn Statement next week.
Schwimmer welcomed the reforms, saying: “I think if there’s capital that starts to be allocated more to UK companies, I think you’ll start to see the benefits of that in relatively short order, over the next year or two or three.”
“The pension reform . . . will add liquidity to this market but there’s a lot of misunderstanding and a lot of mythology about this,” he added.
Schwimmer was talking during a two-day investor event as LSEG presented plans to boost growth through a partnership with Microsoft, and focus increasingly on its data business, which accounts for two-thirds of the company’s revenues. It will launch a £1bn share buyback next year.