London stock market beckons for ‘new Adyens’
It was an unexpected choice. A South African newspaper company, with a billion-dollar interest in Cape Town and Hong Kong, which is listed on the Amsterdam stock exchange. Why Naspers, an abbreviation of Nasional Pers, chose Beursplein 5 at the beginning of 2018? Partly because the stock exchange rules in Amsterdam are the same as those in Johannesburg, CEO Bob van Dijk informed at the time NRC.
The arrival of Prosus, as the divisional investment department of Naspers came to be called, ultimately became the largest European IPO of 2019. A year earlier, Amsterdam was also the scene of the most spectacular IPO on European soil. Also from a young, fast-growing company: payment processor Adyen. Two records, two times Amsterdam. And not in the largest European capital market at the time: London.
If it is up to the British stock exchange, you will choose ‘the next Adyen’ again for London. It is still unclear who that will be, but the Swedish Klarna is a nice candidate. The payment company, with customers also able to shop on credit, is not yet completely sure whether it wants to spend investments in uncertain times, but is seen as a possible new outlier. If it comes off an IPO, London is certainly a major contender, CEO Sebastian Siemiatkowski told financial news agency Bloomberg this spring. According to him, much depends on the financial regulations with the United Kingdom, now that the Brexit has been a fact since the beginning of 2020.
In an attempt to surprise Klarna and young, fast-growing companies, the British stock market regulator FCA announced new rules on Thursday. These ensure that the stock exchange remains in London, the watchdog reports in an explanation. “We need to act to meet the needs of a changing market,” said Clare Cole, director of market surveillance.
The new rules, which came into effect this Friday, entail two major changes. For starters, it is now possible for a company to list a smaller stake on the stock exchange, for founders who want access to the capital market, but who do not want to hand over too much power. Until now, at least a quarter of the shares had to be freely tradable. That has now been reduced to 10 percent.
Towards American stock markets
The London stock exchange is moving towards the Amsterdam and American stock exchanges, where an IPO with a small ‘float free‘ is possible, as long as the value of the listed interest is high enough. For example, Adyen sold only 12 to 13 percent of the shares during its IPO in 2018, for an amount of just under 1 billion euros.
But probably the most important relaxation has to do with voting rights. Companies that go public in London transactions also opt for a share structure with different voting rights. There are then shares with double voting rights, which often go to the board of directors, and shares with no or single voting rights.
In recent years, this way of distributing voting rights has gained popularity among start-ups, because it allows the founders to control a controlling interest. For example, in 2019 Prosus opted for shares in its IPO in Amsterdam in cases where voting rights rust a thousand times. The latter went to the South African major shareholder Naspers. This is of course a large part of the share capital in circulation, but the power lies largely with one party.
Such an opportunity share structure was not prohibited in London dual, but had an important consequence: a company could not enter the ‘premium segment’, a requirement for a place in the prestigious FTSE indices. Meal deliverers Deliveroo and web store The Hut Group, among others, are not holding back and are opting for a structure with double voting rights for their IPO. Despite their billion-dollar valuations, they belong to the ‘standard segment’.
London comeback?
The battle between London and Amsterdam as the financial center of Europe in the 1980s turned out to be in Britain’s favour. The City of London developed the largest when it received by amount of exchange trade, but fell out of favor after the Brexit referendum in 2016 and the hard Brexit that followed. A number of major stock exchanges that wanted to trade with mainland Europe moved to the other side of the Channel. American trade exchanges Cboe and British Turquoise, among others, are opening offices in Amsterdam. Just like the three largest bondholder platforms. Partly drawn up, Amsterdam surpassed London in January as the city with the most stock exchange trade.
Because much is being produced and prevented, Amsterdam is proving to be a sought-after position for an IPO for foreign companies. The international record label Universal Music Group, the Polish locker rental company InPost and the Spanish Allfunds, among others, were listed on the Beursplein.
According to René van Vlerken, main listings at Euronext Amsterdam, the two capitals do not begrudge each other anything. “Let me state that as far as we are concerned there is no rivalry between Amsterdam and London.”
Will the new stock market rules ensure the return of the London stock exchange against Amsterdam? Van Vlerken thinks that’s not too bad. “That London has now caught up with these relaxations. The statistics show that in terms of trading activity, access to global capital, as well as Dutch laws and regulations, processes Amsterdam better than our competition. In that respect, Amsterdam is no longer just an alternative.”
A version of this article also in NRC Handelsblad of December 4, 2021
A version of this article also in NRC in the morning of December 4, 2021