Tuesday, May 21, 2024

London Stock Exchange Bleeds £60bn Amid Darktrace Acquisition

In a pivotal move echoing an “existential crisis,” a significant exodus from the London Stock Exchange, surmounting £60 billion, follows the Darktrace acquisition, intensifying concerns about the market’s viability.

The recent £4.3 billion Darktrace takeover by US private equity firm Thoma Bravo represents the 20th acquisition of a London-listed company this year. These acquisitions, totaling over £26 billion since January, exhibit a worrying trend, with companies being acquired at an average of 36% above their market value. Notably, Darktrace’s acquisition highlights the disparity between market valuation and acquisition premiums.

Moreover, major players like gambling giant Flutter and travel company Tui, among others, have also departed the London Stock Exchange, adding £38 billion to the exodus. Darktrace, heralded as a beacon of London’s tech success, falling under foreign ownership, underlines the market’s crisis.

The situation exacerbates with ongoing discussions surrounding the departure of prominent firms like Shell to overseas exchanges due to valuation concerns. With 11 FTSE 350 firms currently under acquisition offers, the urgency for governmental intervention intensifies.

Charles Hall, head of research at Peel Hunt, emphasizes the need for immediate action, calling Darktrace’s acquisition a “wake-up call.” Suggestions include abolishing stamp duty, pension reforms, and fostering retail investment through a British ISA.

London’s AIM market faces a similar plight, witnessing a 30% decline in listed companies since 2015, attributed to liquidity issues and subdued valuations. Consequently, regulatory reforms are underway to revitalize the market’s allure.

The gravity of the situation has prompted government attention, with proposed measures to disclose pension funds’ equity holdings and stimulate domestic investment. Data from New Financial starkly illustrates the declining domestic investment in the market, highlighting the urgency for corrective action.

In summary, the London Stock Exchange grapples with an existential threat, necessitating immediate governmental and regulatory interventions to salvage its standing as a premier listing venue.

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