(Bloomberg) -- On Tuesday an outage interrupted trading on about 2,000 stocks. On Wednesday, tourism firm TUI AG said it was considering delisting in favor of Frankfurt. On Friday Flutter Entertainment Plc announced a date for its New York listing, and commodities clearer Marex Group confirmed it was also heading to the US.
For the beleaguered London Stock Exchange, which has struggled to regain its footing after Brexit set off a exodus of major companies, this has been a week when a bad situation took a turn for the worse. The outage was the third for the exchange’s parent company in as many months, while the company announcements add to the UK’s disappointment over the summer when major British tech firm Arm Holdings Plc chose a listing in New York rather than return to London.
“The UK market is in danger of falling into some kind of doom loop,” said Anna Macdonald, a senior equity analyst at Sustineri Global Investment GmbH. “You’ve got lower levels of liquidity in the market, fewer listings and it just does seem an increasingly less-attractive place to list.”
A London Stock Exchange Group Plc representative didn’t immediately respond to a request for comment.
Just 10 small firms have listed shares in London this year, raising about $990 million combined, on track for the lowest volume in more than a decade, according to data compiled by Bloomberg. The total was also historically low last year, with just over $1 billion raised.
To be fair, sluggish IPO volumes are a problem for exchanges everywhere, with this year set to be the worst since 2011, the data show. But the LSE is suffering from delistings at the same time and the performance of companies that have chosen to IPO on the exchange isn’t helping to boost sentiment. Deliveroo Plc and Dr. Martens Plc have lost at least 60% in value since they listed in 2021.
“Declining liquidity and low valuations of stocks listed in London is what holds the market back and why many companies choose to list in the US rather than the UK,” said Joachim Klement, a strategist at Liberium.
The Marex news is a particular blow because it pulled plans to list in London two years ago. The company — one of the largest dealers on the London Metal Exchange — now aims to raise money in New York at a valuation of about $1.8 billion to $2.4 billion, a substantial increase since its last attempt at a listing, according to a person familiar with the matter. A spokesperson for Marex declined to comment.
The London-based firm has been bolstering its business in North America in recent years via purchases of several companies with presences in Chicago and New York. It has also expanded its over-the-counter commodities business to the US.
Pressure to Leave
Building materials group CRH Plc and plumbing equipment supplier Ferguson Plc have also chosen New York as their primary venue in recent years. Other companies such as InterContinental Hotels Group Plc and British American Tobacco Plc have faced pressure from shareholders to move their listings to the US.
The outage Tuesday affected about 2,000 smaller stocks twice during morning trading, with both episodes lasting an hour, according to the exchange’s website. LSE said the halt was triggered by faulty technology which prevented the matching of buyers and sellers and the processing of trades.
Meanwhile, the outages give weight to criticisms that London’s market is in decline. If the infrastructure problems continue, they could deter automatic traders, which in turn would reduce liquidity even more, according to Liberium’s Klement.
“I think if it were a one-off event in another market it probably wouldn’t get quite so much attention,” Sustineri’s Macdonald said. “But the fact is everyone’s already pretty worried about the state of the UK market, so it doesn’t help.”
--With assistance from Alexandra Muller and Jan-Patrick Barnert.
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