By Abhinav Ramnarayan

LONDON, (Reuters) – London is struggling to make its stock exchange a safe haven for technology firms that can compete with New York. Trading volumes are falling and there has been a series of big initial public offerings.

Britain introduced new rules to increase the appeal of technology companies listing. They removed the “one share and one vote” rule, and allowed founders to do a premium listing. This allows them to access the prestigious FTSE indices, while retaining substantial control. [L8N2SN25Q].

Rishi Sunak (Finance Minister) promised that London will be made more competitive once Britain leaves the European Union. A number of London-based companies have floated on London’s exchange in anticipation of a smoother listing.

The highest number of companies that have listed on London’s major exchange since 2015 was 38.

Some of the most prominent initial public offerings (IPOs), such as Deliveroo, and THG’s last-year debut are currently trading at a discount to their list prices. Investors tend not to invest in companies whose founders enjoy large voting rights.

The companies were listed on a “standard” basis, so they are not eligible for the FTSE indices.

(Graphics: Mixed bag: Major London IPOs in 2021, https://graphics.reuters.com/BRITAIN-IPO/jnpweayoapw/chart.png)

James Ayre of CCLA Investment Management, said that investors in broad markets want the UK to thrive and flourish. Since the financial crisis global, there has been a slow IPO market.

“But one must read the tea leaves. Investors also care about governance (environment and social governance) and some of this year’s IPOs have raised some concerns in these areas.

Ayre gave two examples, THG (the meal delivery service) and Deliveroo (the food truck company), of listing where investors were dissuaded by the founders’ inequal voting rights.

THG’s shares fell 65% after its 2020 listing. Deliveroo, a company Sunak hailed as “a British success story” at the time it went public in 2020, is 35% lower than where it first listed. Chipmaker Alphawave is at 52.4%.

Other big listings, which are not dual-class shares, are lower as well. Moonpig is down 5% and Made.com 21% respectively.

THG, Deliveroo, and Alphawave were all affected by concerns about corporate governance. Matthew Moulding, founder of THG Ingenuity, gave up his share to appease investors following the scrutiny surrounding the company’s plan to separate its THG Ingenuity Division.

Deliveroo suffered a market plunge on Monday as a result of concerns about its dual-class structure and perceived insufficient protection of its workers. It has been struggling to rebound ever since. It fell 6.6% Monday on news that the EU would reclassify employees working with such apps.

Alphawave crashed on its debut to the market and then fell again following a media report that raised concerns about transactions by related parties.

Analysts believe that some IPOs fell because many of the IPOs were ecommerce businesses that based valuations on pandemic demand. This fell when Britain was released from lockdown in 2021.

Moonpig, Alphawave and Deliveroo spokespersons declined to comment.

Lack of liquidity is another common problem. Many claim the London Stock Exchange main market lacks the appeal that Nasdaq, or the New York Stock Exchange Initial Public Offerings (IPOs) do.

This year, the average U.S. stock turnover was approximately $560 billion. This compares to $78 million in European stocks on an average and $16 trillion monthly for British stocks according data from Rosenblatt securities.

While the numbers in Europe and UK have increased, those living in America are increasing more quickly.

(GRAPHIC: ADVT, https://fingfx.thomsonreuters.com/gfx/mkt/zjvqkyjobvx/ADVT.JPG)

This is also true for performance. Over the last five year, has gone up 18.34% in comparison to 26.42% for Europeans and an amazing 126% of the for the.

Howard Womersley Smith is a Reed Smith fintech lawyer and data analyst. He stated that while pension funds still invest (in London), there’s less interest from retail investors to put money in the stock exchange, which affects the liquidity of shares.

London’s main markets IPOs reached their peak in 2015, at $16.88billion. However, Amsterdam and Stockholm have been steadily growing their share with IPO volumes of $9.1billion and $8.98billion, respectively, according to data from Refinitiv.

(GRAPHIC: Fierce competition for London post-Brexit, https://graphics.reuters.com/BRITAIN-IPO/klvykngrrvg/chart.png)

LEAVING LONDON

According to Dealogic, the relative weakness of UK shares has attracted cash-rich private equity firms that have spent $36.9 Billion taking British-listed companies like W Morrisons or TalkTalk private.

Ryanair (NYSE:) and BHP Billiton have both announced that they will be delisting from the LSE.

This all adds to the desire to attract new businesses, however bankers and analysts think that more regulations has attracted companies who were not looking to follow a long-term trend.

A senior banker in equity capital markets said this: “The performance of the year in 2022 will inevitably harm the market for IPOs. Investors will also be more skeptical when the year ends.”

Although it won’t be easy, the danger is that more companies move to New York. Investors are much more open to companies that haven’t made a profit. He said that it could be worse, he suggested Amsterdam.

($1 = 0.7331 pounds)