Are UK stock markets facing an existential crisis?

This week saw the UK market undergo another body blow with the news that Alphawave, a Canadian chip and semiconductor maker, is being acquired by Qualcomm for the sum of $2.4bn.

In 2021 Alphawave was one of many companies that listed on the LSE raising £856m at 410p a share. This sum amounted to 360m shares and 28% of its business as it looked to open a new headquarters and R&D centre in Cambridge as part of its overseas expansion.

It should have been a sure thing given that its customers included the likes of Samsung, TSMC, as well as Intel, yet it’s been snapped up by Qualcomm for what is essentially pocket change of $2.4bn or 183p, less than half the price of its 2021 IPO.

This however wasn’t the only setback that hit the London market this week with the news that Spectris, another UK tech company is in the crosshairs of US private equity firm Advent who had tabled a $4.4m proposal to take the business private.

Coming on top of the news last week that Wise is set to move its primary listing to the US, and the news that Cobalt Holdings, had pulled its plans to IPO, saying it was looking to raise the funds needed privately, and it’s hard not to see not only a trend emerging, but accelerating as well.

Even Shein, the China founded fast fashion group, appears to have turned its nose up with respect to a London listing, while Unilever has chosen to list its ice cream business, the Magnum Ice Cream company, in Amsterdam.

The reality is that this hasn’t come as a surprise, given the signs of the last 12 months which has seen the likes of Just Eat Takeaway, CRH, Hargreaves Lansdown, TUI, and Flutter Entertainment move their primary listing away from the UK, with Ashtead set to follow, while the AIM market is also struggling.

Only a few years ago mining giant BHP Billiton moved its primary listing to Sydney Australia and away from the UK, while in the last couple of years we’ve heard murmurs that Shell management have come under pressure to move its primary listing to the US.

There’s been any number of theories as to why the London market has started to lose its lustre so to speak, however it has been a long time coming and although we saw an increase in confidence in 2021, when the London Stock Exchange saw a record year for IPOs with 126 companies listing and a total of £16.8bn raised.

Since then, the picture has darkened considerably and you don’t have to look far to understand why.

During that record year for IPOs, we saw the likes of Darktrace, Deliveroo, Wise, Alphawave, Dr. Martens, Trustpilot, Oxford Nanopore, and Moonpig all launch to much fanfare.

Of those only one is currently trading at a premium to its IPO valuation, that one being Wise since it announced it was moving its listing over to the US.

All the others that are left have seen sharp falls in their valuations, with Darktrace having already gone, with Deliveroo set to follow, along with Alphawave.

As a reminder the Alphawave IPO price was 410p, Deliveroo 390p, Darktrace 250p, Wise 800p, Oxford Nanopore 425p, Trustpilot 265p, Moonpig 350p and Dr. Martens 370p.

Is it any wonder no one wants to list in the UK, when you look at these types of return?

It would be very easy to blame the current government for the malaise surrounding the UK market, and they certainly aren’t helping with some of their policies around non-doms, capital gains tax, and the AIM market, however the previous government were little better.

There has been talk of some changes, however none of any of the proposals under discussion are likely to move the dial and some of them are just plain daft, namely the requirement to encourage UK pension funds to invest in UK infrastructure projects.

If a project is investable then money should flow into it naturally, unless there are barriers to it doing so.

The reality is that the UK has become less investable due to higher taxes, removal of reliefs on dividends, stamp duty, less retail flow, and higher regulatory barriers for pension funds.

Unless drastic action is taken then we could well see many more UK names leave these shores, with the likes of much bigger names looking at considering leaving in the coming months and years.

If any more warnings were needed the last few months have shown us that a trend is forming, and once it starts to gain traction it will be very difficult to stop.

We are starting to see some semblance of a movement when it comes to the City of London making itself heard at this week’s Peel Hunt FTSE250 conference, with Conservative Party leader Kemi Badenoch urging UK business leaders to “get on the pitch too”.

While this is a very welcome intervention, it jars somewhat when you consider that Badenoch was business secretary in the previous Conservative administration, and which in turn helped to contribute to the current situation which we find ourselves in.

Who can forget the famous comment of “f*** business” said to have been made by former PM and Tory leader Boris Johnson, which appeared to mark a significant shift in how the Conservatives were perceived as a business-friendly party.

I’m not sure the problem is as simple as getting on the pitch as she says. Business has never been shy about doing that. It’s the politicians that are the problem here, and she has a lot of work to do in repairing the Conservatives reputation on that score.