City dealt a fresh setback as financial service company Wise decides to relocate stock exchange to New York
In a significant move, the fintech firm AJ Bell has announced that it will be moving its primary listing from London to New York. Contrary to some reports, this decision is not aimed at expanding the company's investor base, as AJ Bell already does not maintain a secondary listing in London.
The strategic relocation is part of a broader trend among UK-listed companies, with the US markets offering higher valuation multiples and more attractive net remuneration packages compared to the UK. This can lead to better capital raising opportunities for these companies.
While the US does not offer a larger pool of potential investors compared to London, the American markets are seen as more lucrative due to their higher valuations. The US market's regulatory environment, despite tightening disclosure and compliance rules for foreign private issuers, remains a dominant and attractive location for IPOs.
The move is expected to provide more investors with the opportunity to buy shares, although there is no definitive confirmation that this will be the case for AJ Bell. The company has clarified that the relocation will not affect its commitment to the UK market.
Interestingly, none of the mentioned money transfer groups, including AJ Bell, have announced any intent to move their primary listing to New York. Hargreaves Lansdown, a different money transfer group, is not the latest UK-listed firm to move to the US.
It's worth noting that the UK government is actively implementing strategies to boost competitiveness and attractiveness of UK capital markets. However, current tax policy concerns still push some companies abroad. The UK is seeking to improve its attractiveness but faces challenges retaining some listings.
Despite the relocation, AJ Bell has confirmed that it will continue hiring and investing in the UK. Contrary to some reports, there is no indication that the company will cease its operations or investment in the UK while moving its primary listing to New York.
In conclusion, the move by AJ Bell, like other UK companies, is driven mainly by the potential for higher valuations and compensation opportunities in the US, combined with perceived tax disadvantages and regulatory considerations in the UK. The UK is seeking to improve its attractiveness but faces challenges retaining some listings.
[1] Investopedia. (2021). Why UK Stocks Are Moving to the US. [online] Available at: https://www.investopedia.com/articles/investing/052715/why-uk-stocks-are-moving-us.asp
[2] Financial Times. (2021). US beats London as destination for UK IPOs. [online] Available at: https://www.ft.com/content/779662f8-9b5d-48d2-9b4c-66426e92a58b
[3] EY. (2021). Global IPO trends: H1 2021. [online] Available at: https://www.ey.com/en_gl/services/advisory/transactions/ipo-trends-h1-2021
[4] The Guardian. (2021). UK government to review tax rules for entrepreneurs and investors. [online] Available at: https://www.theguardian.com/business/2021/apr/13/uk-government-to-review-tax-rules-for-entrepreneurs-and-investors
- The strategic decision made by AJ Bell to move its primary listing from London to New York is part of a broader trend in finance, where US markets offer higher valuation multiples and more attractive net remuneration packages compared to the UK, making for better capital raising opportunities.
- While the US markets might not provide a larger pool of potential investors compared to London, they are considered more lucrative due to their higher valuations, and their regulatory environment remains dominant and attractive for companies seeking Initial Public Offerings (IPOs).
