‘Crisis time’: The London Stock Exchange's £100 billion exodus

Companies worth about £100 billion are on the way out of the London Stock Exchange so far this year, either by being bought up or via moving the main home for their shares overseas, and experts fear there is much more to come.

Research by the Evening Standard and investment bank Peel Hunt shows that companies worth over £26 billion have already agreed to be sold in 2024, to other listed firms or private equity. 

That comes alongside a combined value of £38 billion for firms shifting their main listing abroad. And Anglo American today rejected the biggest takeover offer so far, saying BHP’s £31 billion bid “undervalued” the firm and was “opportunistic”. 

Including the current headline figure from that deal takes the total in market capital involved in the exodus to £95billion. 

City experts are on watch for an increased bid from BHP. Another multi-billion deal struck was today, for cyber security firm Darktrace. 

Charles Hall, Peel Hunt’s head of research, said: “There are 21 companies in a bid process with 12 of them in the FTSE 350.”

He warned: “We are rapidly exporting some of our best growth companies, with Darktrace going to US private equity. It really demonstrates the dire state of the London market and the urgency of measures to restore competitiveness and fund flow, including removing stamp duty, pension reform and intro ducing the British ISA.”

Any deal reached for Anglo would bring the trend to the top quarter of the FTSE 100.

Chief executives are already expressing frustration with relatively low valuations for major companies in London, especially compared with those on offer at arch-rival New York. 

The flight from the City has already reached companies from the top tier. Packaging maker DS Smith is being taken out by a £5.7 billion offer from International Paper.

And there could be even bigger seismic shocks ahead. Wael Sawan, the CEO of the UK’s biggest company, Shell, is widely believed to have put London on two-years notice to lift valuations before a potential move of its listing to the US. 

The bid speculation has been dubbed “the great fire sale of London” by City commentators and it has helped pump the headline valuation of the FTSE 100 to record, which nonetheless, remain below the all-time highs seen in arch-rival New York. City experts were braced for more action.

Tony Cross at Investment data base Investegate said: “At what point is Anglo’s management painted into a corner, where they have to accept a hostile bid or find a listing venue with a more accurate valuation?”

He pointed to a “bigger question”, asking: “Why is the London market appearing to be unable to accurately value even the biggest companies?”

Concern over a drop in the amount of UK assets being bought by investors has prompted government to draw more liquid cash into the market, to help with demand for shares, lifting valuations. Chancellor Jeremy Hunt’s so-called Mansion House reforms, unveiled last July, and his plans for a British ISA rax break on savings are designed to pump more liquidity into the market.

 Peel Hunt’s Hall added: “It is crucial that we keep up the momentum on Mansion House reforms, and initiatives such as the British ISA, to help London's capital market fulfil its vital role in serving the wider economy."

He also pointed to some hopes for a boost from a revival in initial public offerings, when companies raise capital from share sales for the first time.

“Our latest IPO Speedometer offers hints of a recovery with an improvement in new companies coming to market over the next 12 months but more needs to be done to consolidate what could be a fragile recovery.”

In the meantime, the mood in the City remained bleak as another day brought another multibillion pound take-out deal.

Dan Coatsworth at broker AJ Bell called it “crisis time” as London “fights to preserve the integrity of the UK market”.