London’s IPO market is falling behind emerging markets from the Middle East and Asia

The IPO market in London is deteriorating further, with funds raised this year lagging behind even smaller, emerging markets. Through November, IPO fundraising on the London Stock Exchange has dropped nearly 9% this year to just $1 billion. This decline has pushed the UK down four spots to 20th place in the global IPO market rankings, a far cry from its recent position as a consistent top-five contender.

Emerging markets such as Oman, along with Malaysia and Luxembourg, have surpassed London in IPO activity. This seismic shift underscores a dramatic reversal from prior years, when London was a leading global hub for public offerings.

The rise of Middle Eastern and Asian IPOs

The Middle East and Asia now dominate the IPO landscape, collectively accounting for over half of global IPO funds and five of the top 10 deals this year. Notable highlights include:

• Dubai: Talabat, the local subsidiary of Delivery Hero, raised $2 billion in the largest global tech IPO of the year.
• Abu Dhabi: Lulu Retail Holding secured $1.7 billion, and a state-owned Omani oil company unit raised $2 billion.
• Asia: Tokyo Metro’s $2.4 billion IPO and Hyundai Motor’s $3.3 billion unit listing in India showcased the region’s growing dominance.

These deals reflect the strategic efforts of Middle Eastern and Asian governments to deepen capital markets by listing major national entities locally.

London’s decline: Structural challenges

London’s fall from grace highlights deep structural issues:

• Lower stock valuations: London struggles to offer competitive IPO valuations.
• Risk-averse investors: Domestic pension funds show limited appetite for high-risk investments.
• Competition from other financial hubs: Cities like Dubai, New York, and Hong Kong are luring companies away.

Recent reforms to the UK’s listing rules, including greater flexibility in stock structures and disclosure requirements, have yet to yield significant results. Despite these efforts, London failed to host any of the world’s top 100 IPOs this year, while other regions experienced a boom in multi-billion-dollar deals.

IPO exodus and M&A surge

London’s equity market is shrinking at an unprecedented pace:

• Record delistings: 45 companies left the London Stock Exchange this year, the highest number since 2010. Many cited low liquidity and poor analyst coverage.
• Mergers and acquisitions: Private equity firms like KKR and EQT have swooped in, acquiring undervalued UK companies and turning them private.

This trend further erodes the UK’s capital market ecosystem, diminishing its appeal as a global financial hub.

Seeking a comeback amid global competition

Despite the grim outlook, there are bright spots. The overall value of equity capital raised through secondary offerings has risen 60% this year to $30.8 billion. Additionally, global firms such as CK Infrastructure Holdings and Vivendi have chosen London for secondary listings, signaling that the city still holds some allure.

The UK government has pledged to revive the market, with Prime Minister Keir Starmer promising to scrap regulations that hinder economic growth. Key reforms include allowing dual-share class structures to attract tech firms and increasing flexibility in capital disclosures.

Future prospects

Companies like Shein, which is exploring a London IPO in early 2025, and Canopius Group, seeking a $3 billion valuation, could breathe life back into the market. However, experts agree that attracting bold, growth-focused companies requires not just policy tweaks but a cultural shift toward embracing higher-risk ventures.

As Alexandra Jackson of Rathbones Group told Bloomberg:

"The UK needs more adventurous investors and companies willing to take a chance. Without that, the path to recovery will remain long and uncertain."

For now, London must fight to reclaim its place as a leading global IPO destination, or risk being permanently overshadowed by the rapidly ascending Middle Eastern and Asian markets.