Why do UK IPOs lag the US?

CGTN Europe

CGTN Europe interviewed Joshua Mahony, Chief Market Analyst at Scope Markets

Transcript

00:00London has seen its largest initial public offering of the year so far.

00:04Beauty Tech Group, which owns three companies selling home beauty devices,

00:08saw its shares rise by as much as 6.6% in its trading debut.

00:12It ended the day just below that as the market closed.

00:15And in another boost for the city, food and drinks company Princess

00:19says it's considering listing in the UK capital.

00:22Well, this is welcome news for London,

00:24which has seen a dwindling number of listings this year.

00:26It's fallen out of the top 20 IPO venues, lagging behind Mexico, Malaysia and Oman.

00:33While the United States, Hong Kong and China dominate, the UK comes in at 23rd,

00:39raising just around $250 million this year so far.

00:43That compares to around $23 billion in 2021.

00:47And it makes 2025 the worst year for listings in three decades.

00:52Well, let's talk now to Joshua Mahoney, who's chief market analyst at Scope Markets.

00:56Good to see you again, Joshua.

00:58So apart from these two companies, which we've just mentioned,

01:00it seems that IPOs are choosing almost everywhere but the UK.

01:04Why is that?

01:07I mean, look, this is part of a trend that has seen the US essentially sucking up most of the capital

01:12for companies, certainly within the English-speaking world.

01:16And I think the UK, yes, it has been positioned well historically,

01:19but it finds itself in a bit of an interesting position where, of course,

01:22the valuations attached to companies over in the US have always been historically high.

01:27The capital within the US market is significantly higher than the UK.

01:32And of course, for English-speaking companies,

01:34it does make sense to perhaps list over in the US for those benefits.

01:38It doesn't necessarily stand to reason for a Saudi company to list in the same way

01:42as maybe a UK or English-speaking firm.

01:46And so you can see why some of these different regional companies might list locally,

01:50whereas English-speaking companies might choose to list over in the US

01:54given the fact that it is just positioned to give them higher valuations.

01:58And we're seeing that recently with the talk of, say, AstraZeneca with the dual listing

02:02and many companies potentially either choosing to move their listing

02:07or possibly getting bought up by private equity

02:10and ultimately then getting re-listed over in the US.

02:13So you say the US poised to offer higher valuations.

02:16If you compare the US to the UK,

02:18is there anything else that sets them apart the way that governance is managed, costs, anything else?

02:26Well, I mean, look, ultimately,

02:28when you're looking at the weakness of the IPO market at the moment,

02:31just raise questions about the positioning of the UK

02:34and what we could do to be able to draw additional IPOs into the country,

02:39I think there's going to be a raft of things that are within the mindset of a company potentially listing.

02:44When it comes to rules and regulations, you know,

02:47is this a good time for the government suddenly to start easing those regulations

02:51at a time where, of course, they're trying to clamp down on many of the top earners in the country?

02:57They're potentially raising taxes.

02:59So do they then start to loosen those regulations for companies or owners of companies trying to sell shares?

03:06You know, it's just not necessarily a great position for them to be in at the moment.

03:10So that's probably not necessarily going to change.

03:13In terms of the attractiveness of the US market as well,

03:15everything that's happening at the moment with Donald Trump and his government,

03:19really, it's a US-centric approach.

03:21So it's a talk of bringing your operations to the US.

03:24So in a way, it sort of feels like it makes sense to be located in the US as well for that kind of reason.

03:30So we've had news of these two IPOs, this beauty group, this food and drinks group.

03:36Are there any particular sectors which are attracted to listing in the UK or to the US?

03:42Well, look, I mean, ultimately, I think, as I've sort of mentioned,

03:48I think for the most part, it stands to reason that companies that are big enough

03:53and English-speaking and focused and relatively globally focused will probably look to the US ideally.

04:00I would say probably domestically focused firms in the UK would probably,

04:04it stands to reason that they would list in the UK.

04:07It doesn't really make much sense for a company where all of their revenues are in the UK for them to suddenly list over in the US.

04:14Probably they would keep it domestic.

04:16But soon enough, what you see is other companies abroad, let's say a supermarket chain in the US,

04:21might see the lower valuation attached to a company in their industry in the UK

04:25and decide to buy that for their portfolio.

04:28Soon enough, it gets swallowed up and that's part of a company listed in the US.

04:32Joshua, great to talk to you as always.

04:33Thanks for coming on the programme.

04:35That's Joshua Mahoney from Scope Markets.

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