By David Ricketts

Of Financial News


One of the City's most senior lawyers has said the move by FTSE 100-listed Ashtead to shift its primary listing from London to New York should come as "no surprise," but he believes U.K. reforms designed to entice more listings are starting to bear fruit.

The construction equipment rental group, which generates the vast majority of its profit in North America, said on Tuesday that the U.S. was its "natural long-term listing venue."

Ashtead, which has a market valuation of around 28 billion pounds ($35.76 billion), said the decision was in the "best interests of the business and its stakeholders." The majority of its employees are also based in the U.S., as is its headquarters.

While Ashtead intends to retain a London listing as an international company, it intends to exit the FTSE 100 in the next 12 to 18 months, pending shareholder approval.

A New York listing would give it access to "deeper U.S. capital markets," Ashtead said.

Mark Austin, a corporate lawyer at Latham & Watkins and a member of the influential Capital Markets Industry Taskforce, said Ashtead's move shouldn't be a cause for concern among City investors.

"The decision by Ashtead is no surprise," Austin told Financial News.

"While their origins are in the U.K., they are these days a predominantly U.S. business and so being listed in the U.S. makes sense for them."

He added: "But unless you are a U.S. business in that way or to some extent are in particular sectors, the U.S. isn't the panacea that cures all ills--and that lazy narrative that sprang up a couple of years ago is widely discounted now."

The comments come as London trails other major financial centers for listings, with Bloomberg research placing it 20th in a global ranking and behind markets such as Luxembourg, Oman and Malaysia.

"While it seems like a problem, in reality you can count the number of big U.K.-listed companies going stateside on one hand," said Dan Coatsworth, an investment analyst at AJ Bell.

"If your shareholders, staff, operations and customers are predominantly in the U.S., it makes perfect sense to list your shares in that country."

"More important for the U.K. is replenishing the pot of companies that we've lost to takeovers or delistings. The relaxation of listing rules in July should help on this front, with expectations for more IPOs from 2025."

Ashtead is the latest company to switch its listing from London to New York, following Paddy Power owner Flutter and building group CRH.

Meanwhile, Cambridge-based chip designer Arm Holdings chose New York for its stock market debut last year.

Swedish buy-now, pay-later firm Klarna said last month it had filed registration documents with the Securities and Exchange Commission in the U.S. ahead of a widely anticipated IPO, marking another blow for the London Stock Exchange.

Some remain concerned about companies showing a preference for the U.S. as a place to list shares.

"We can make excuses about every departure but the reality is that a trickle could turn into a flood," said Charles Hall, head of research at U.K. broker Peel Hunt.

He added: "The impact on the U.K. would be substantial given direct loss of tax revenue [such as dividends and stamp duty], as well as loss of high-income jobs and a permanent diminution in the wider ecosystem. How would we feel if Shell decided to depart?"

Hall said measures such as mandating pension funds to invest a minimum amount in U.K. companies and the removal of stamp duty on UK-listed shares could help make the London market more attractive compared to overseas rivals.

Despite some concerns over companies leaving the U.K. for rival financial hubs, there have been recent wins.

Paris-based streaming firm Canal+ is set to float on the London market following a spin-off from parent company Vivendi.

Meanwhile, budget computer maker Raspberry Pi made its debut on the London Stock Exchange in June, with its share price rising around 15% since.

The calls for calm after Ashtead's announcement come after Revolut chief executive Nikolay Storonsky told the 20VC podcast earlier this month that it was "not rational" to list shares in the U.K. over the U.S.

Storonsky said London "can't compete" with the liquidity in the U.S., and criticized the stamp duty that is levied when buying shares in U.K. companies.

"I just don't understand how the product that is being provided by the U.K. can compete with the product provided by the U.S.," he said.

Last month, several investors told FN that a second Donald Trump presidency could spur more companies to list in the U.S., given his desire to cut red tape, taxes and scale back onerous regulation for businesses.

However, Austin said various measures in the U.K.--including one of the biggest overhauls to the listing regime in three decades unveiled in July--were starting to have an impact.

"The U.K. reforms are working on the ground," he said.

"The tailwinds behind the U.K. markets are building, with a growing pipeline of companies looking to use the U.K. markets in the latter part of 2025 and into 2026 as the private to public capital cycle gathers momentum in Europe."

Financial News is owned by News Corp, the parent company of The Wall Street Journal and Dow Jones Newswires.


Write to David Ricketts at david.ricketts@dowjones.com


Website: www.fnlondon.com


(END) Dow Jones Newswires

12-11-24 1006ET