London stock market beckons for ‘new Adyens'

Asia's Tech News Daily

London stock market beckons for ‘new Adyens’

It was an unexpected choice. A South African newspaper company, with a billion-dollar stake in a Chinese tech giant and headquartered in Cape Town and Hong Kong, which established itself on the stock exchange in Amsterdam. Why Naspers, an abbreviation of Nasionale Pers, chose Beursplein 5 at the beginning of 2018? Partly because the stock exchange rules in Amsterdam are comparable to those in Johannesburg, CEO Bob van Dijk informed at the time NRC.

The arrival of Prosus, as the divisional investment department of Naspers came to be called, ultimately turned out to be the largest European IPO of 2019. A year earlier, Amsterdam was also the scene of the most spectacular IPO on European soil. Also from a young, fast-growing company: payment processor Adyen. Two records, twice Amsterdam. And not in the largest European capital market at the time: London.

If it is up to the British stock exchange, ‘the next Adyen’ will soon choose London again. It is still unclear who that will be, but the Swedish Klarna is a nice candidate. The payment company, with which customers can also shop on the go, is not yet completely sure whether it will issue shares in uncertain times, but is nevertheless seen as a possible new outlier. If it comes off an IPO, London is certainly a major contender, CEO Sebastian Siemiatkowski told financial news agency Bloomberg this spring. According to him, a lot depends on the financial regulations that the United Kingdom will introduce now that the Brexit has been a fact since the beginning of 2020.

In an attempt to convince Klarna and other young, fast-growing companies, the British stock market regulator FCA announced new rules on Thursday. They must ensure that the London stock exchange remains a “trusted and attractive place for quotations”, the watchdog reports in an explanation. “We need to act to meet the needs of a changing market,” said Clare Cole, director of market surveillance.

The new rules, which came into effect this Friday, entail two major changes. For starters, it is now possible for a company to list a smaller stake on the stock exchange, for founders who want access to the capital market, but who do not want to hand over too much power. Until now, at least a quarter of the shares had to be freely tradable. That has now been reduced to 10 percent.

Towards American stock markets

The London stock exchange is therefore moving towards the Amsterdam and American stock exchanges, where an IPO with a small ‘free float‘ is possible, as long as the value of the listed interest is high enough. For example, Adyen sold only 12 to 13 percent of the shares during its IPO in 2018, for an amount of just under 1 billion euros.

But probably the most important relaxation has to do with voting rights. Companies that make an IPO in London can now also opt for a share structure with different voting rights. There are, for example, shares with double voting rights, which often go to the board of directors, and shares with no or single voting rights.

In recent years, this way of allocating voting rights has gained popularity among start-ups, because it allows the founders to retain a controlling interest. For example, in 2019 Prosus opted for shares that in some situations have a thousand times as much voting rights during his IPO in Amsterdam. The latter went to the South African major shareholder Naspers. As a result, although a large part of the share capital is in circulation, the power lies largely with one party.

Such a dual share structure was not prohibited in London, but it had an important consequence: a company could not enter the ‘premium segment’, a condition for a chance of a place in the prestigious FTSE indices. Meal deliverers Deliveroo and online store chain The Hut Group, among others, did not let this stop them and opted for a structure with double voting rights during their IPO. Despite their billion-dollar valuations, they now belong to the ‘standard segment’.

London comeback?

The battle between London and Amsterdam as the financial center of Europe seemed to be turning in Britain’s favor in the 1980s. The City of London has since been the largest when it comes to volume of exchange trading, but fell out of favor after the Brexit referendum in 2016 and the hard Brexit that followed. A number of major stock exchanges seeking to maintain trade with mainland Europe moved across the Channel. The American trade exchanges Cboe and the British Turquoise, among others, opened offices in Amsterdam. Just like the three largest bondholder platforms. Partly because of this, Amsterdam surpassed London in January as the city with the most stock exchange trade.

Because there is a lot of trading and therefore a lot of money in circulation, Amsterdam appears to be a desirable position for an IPO – also for foreign companies. The international record label Universal Music Group, the Polish locker rental company InPost and the Spanish Allfunds were listed on the Beursplein.

According to René van Vlerken, head of listings at Euronext Amsterdam, the two capitals do not begrudge each other anything. “Let me state that as far as we are concerned there is no rivalry between Amsterdam and London.”

Will the new stock market rules ensure the comeback of the London stock exchange against Amsterdam? Van Vlerken thinks that’s not too bad. “We do not see the fact that London is now catching up with these relaxations as a serious threat. The statistics show that in terms of trading activity, access to global capital, as well as Dutch laws and regulations, Amsterdam outperforms our competition. In that respect, Amsterdam is no longer just an alternative.”

A version of this article also appeared in NRC Handelsblad on 4 December 2021

A version of this article also appeared in NRC in the morning of December 4, 2021

London stock market beckons for ‘new Adyens’
Source link London stock market beckons for ‘new Adyens’

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