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LONDON STOCK EXCHANGE PLC

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London new share listings revival driven by rising markets

06/21/2013 | 10:24am EDT
A trader works on the trading floor in London

LONDON (Reuters) - Rising share prices, rather than different procedures, have helped to spur a revival in new listings in London this year and some bankers and investors believe more could be done to improve the process of bringing a company to market.

The amount raised from new share listings on London's main stock market this year is more than four times that in the same period in 2012, according to London Stock Exchange (>> London Stock Exchange Group Plc) data. British companies alone have raised more than 1.5 billion pounds.

And the shares of most of the companies that listed this year have performed strongly.

This contrasts sharply with a run of troubled deals in the past few years which led U.S.-based fund manager BlackRock (>> BlackRock, Inc.) to write to investment banks in 2011 highlighting strained relationships in the market and suggesting ways to improve the process.

Some of these suggestions, such as banks introducing new issue candidates to potential investors at a much earlier stage before launching a listing, have been heeded. But bankers also said that, on the whole, the process remains largely the same.

"Many of the suggestions that have been made over the last two years are still being discussed, they haven't been implemented," Reinout Koopmans, co-head of European Capital Markets at Jefferies said at a discussion hosted by City AM.

He said the real driver for the new issue revival had been a change in sentiment. "A very important component is that we have seen a very significant inflow of US money into the UK market."

Improvements suggested by many market participants which are yet to be implemented include greater transparency on investment bank fees, fewer banks working on each deal and the provision of independent analyst research on the companies planning to float.

Anne Richards, chief investment officer at Aberdeen Asset Management said ideally she would only want to hear from one investment bank working on a deal, rather than several jockeying for her attention as can happen now.

Craig Coben, head of equity capital markets for Europe, Middle, East and Africa (EMEA) at Bank of America Merrill Lynch (>> Bank of America Corp) - which penned its own guidelines for improving the process - said the market had not yet returned to normal.

"It is still a little bit too early to judge whether the IPO (initial public offering) market is back in force in London, there are still broad swathes of sectors that effectively can't IPO in London," he said.

Coben highlighted small-to-medium sized companies, and high-growth businesses as those which find it harder to list in London, partly because of a lack of investor following.

He said a question also remained about emerging markets firms, which had previously been a key driver of activity.

Scandals at mining companies ENRC (>> Eurasian Natural Resources Corporation) and Bumi (>> Bumi PLC) have prompted regulators to bring in changes to the listing rules, particularly around corporate governance.

"Some of the recent scandals have cast a pall over those transactions and with the selloff in commodities, the selloff in emerging markets, a very important part of the volume of IPOs in London risks being eclipsed quite substantially," he said.

For now, the performance of those stock market debuts which have taken place in London this year continues to help to encourage investors to look at upcoming deals.

Estate agent Countrywide Holdings (>> Countrywide plc) is trading around 40 percent above its March listing price, while life insurer Partnership Assurance (>> Partnership Assurance Group PLC) has risen 15 percent since its market debut earlier this month.

"There was a view that if I don't participate in an IPO, I can buy it cheaper in the secondary market," said Alasdair Warren, head of equity capital markets for EMEA at Goldman Sachs.

"With IPOs performing well there is change in view that if I don't participate I'm going to miss out ... and that has meant the breadth of engagement across the market has been good."

(Editing by Jane Merriman)

By Kylie MacLellan


© Reuters 2013
Stocks mentioned in the article
ChangeLast1st jan.
ABERDEEN ASSET MANAGEMENT 0.00%End-of-day quote.23.44%
BANK OF AMERICA CORPORATION 1.50% 42.01 Delayed Quote.38.60%
BLACKROCK, INC. 1.89% 867.1 Delayed Quote.17.94%
COUNTRYWIDE PLC 0.00%End-of-day quote.1.08%
DOW JONES AFRICA TITANS 50 INDEX 0.80% 542.4 Delayed Quote.1.55%
LONDON STOCK EXCHANGE PLC 1.69% 7222 Delayed Quote.-21.18%
S&P AFRICA 40 INDEX 1.04% 179.01 Delayed Quote.2.35%
THE GOLDMAN SACHS GROUP, INC. 2.33% 365.97 Delayed Quote.38.78%
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P/E ratio 2021 23,9x
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David Adam Schwimmer Group Chief Executive Officer & Executive Director
Anna Olive Magdelene Manz Chief Financial Officer & Director
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