In this series, we bust the jargon and explain a popular investing term or theme. Here it’s primary listings.
What is this?
A company’s primary listing refers to the stock market on which its shares were first listed when it went public. It is also possible to have a secondary listing on another market.
This strategy gives a company access to a greater pool of capital, which is why so many larger businesses enjoy the arrangement. Increasingly, however, the secondary listing market (usually New York) is starting to look a lot more welcoming than the primary listing market.
Why are we reading this now?
More British companies are keen to swap their primary listing from London to New York, where they believe their shares would be more generously valued because of the greater pool of available capital. The company’s bosses may also hope to benefit from the higher pay rates for top executives in the US, although this is rarely the reason stated for the move.
Who is quitting the UK?
The latest is the gambling giant Flutter, which owns Betfair, Paddy Power and Poker Stars. At this week’s annual general meeting, Flutter shareholders approved the New York move. In its defence, Flutter can argue it has expanded in the US.
Flutter is following the lead of several others. Travel company Tui has swapped London for Frankfurt. Building supplies business CRH and pharmaceutical company Invidior have snubbed London in favour of New York. Shell has threatened that it may be the next to leave.
Any more planning to move?
A group of shareholders in Glencore has begun to agitate for a move to Sydney on the basis that the mining group’s shares have underperformed in London.
Who loses out?
These departures are obviously damaging to London, especially since the London Stock Exchange is struggling to attract new listings to replace the companies that have quit in the hope of being objects of desire elsewhere. The Government put forward proposals last summer to address this issue. But unless it can be solved soon, the London stock markets may be in jeopardy. Charles Hall of brokers Peel Hunt even claims that the UK market ‘is dying’.
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Such an outcome would be particularly damaging for smaller companies who would, in the normal course of events, have made their market debut in London.
Is this just affecting London?
No. The French oil major Total may say au revoir to Paris, heading for – you guessed it – New York, arguing the transfer would help narrow the valuation gap between Total and the US petroleum names.
Who is to blame for this?
The London Stock Exchange has played a role. A New York primary listing seems to offer more capital on offer from investors. But UK pension funds and institutions are also in the dock for the failure to support UK-listed companies. Holdings in such firms make up only about 4 per cent of their portfolios.
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