The head of the London Stock Exchange, David Schwimmer, has hit back at claims the U.K.’s main stock market is in a state of decline, saying it’s “a very healthy, very successful, very well functioning market.”
In a roundtable meeting attended by MarketWatch, LSEG
CEO Schwimmer said “the London markets work very well,” as he blamed this years’ drought of initial public offerings (IPOs) on market cycles and the state of the global economy. “IPO markets open, IPO markets close, they’ll be back.”
The City stock exchange has seen average daily trade volumes crash by 38% this year, as the number of initial public offerings (IPOs) have plummeted from 26 in the first half of 2022, to just 18 in the first half of 2023.
That has alarmed some analysts. “We are currently in a doom loop, where valuations are low, liquidity is reducing, investors are seeing withdrawals and there is little desire to IPO,” Charles Hall, head of research at Peel Hunt, said in a recent note.
Schwimmer, however, argued the drop in initial public offerings (IPO) is a reflection of the state of macroeconomic conditions over anything specific to the London Stock Exchange. “The macroenvironment is having an impact on markets all over the world,” he said.
The decision by British tech giant ARM Holdings PLC
to list in New York instead of London in August 2023 was also seen as a major blow to the U.K.’s main stock market, as critics took it as further evidence that firms are choosing the U.S. over the U.K. for IPOs.
“There’s a lot of mythology around this. The notion that you get a better valuation in the U.S, that’s a myth. London is in some cases, higher in terms of valuation,” Schwimmer said. “With respect to liquidity, LSEG itself has sold £10 billion of its stock this year, with no problem from a liquidity perspective.”
The LSEG chief, who took up his position in April 2018 argued that “compensation practices” in the U.K. are partly responsible for companies choosing to list in New York instead of London, as he pointed to the higher pay handed out to executives at U.S.-listed firms.
Schwimmer also pointed blame at the U.K. press for negativity surrounding London’s markets. “There’s a very different media and cultural environment here than in other markets I’ve operated in,” the native New Yorker and former Goldman Sachs executive said.
He noted that U.S. media outlets have been less critical towards ARM, despite the fact that shares in the semiconductor company are currently trading below the price offered during its IPO.
“[ARM] did its offering and it traded below its IPO price. I’ve not heard any criticism of the U.S. market,” Schwimmer said.