Euronews: The Great Delisting - European Companies Move to US Stock Exchanges

Several European companies have chosen to withdraw from the continent's stock exchanges and list on the US, according to a Euronews Business analysis that shows the reasons for these departures.

A few decades ago, the financial center of London was seen as the right place for listings, especially after the smaller exchanges in Cardiff, Edinburgh, Aberdeen and Leeds merged with the larger Stock Exchange in the capital. However, the global focus is now shifting to the US, particularly to exchanges such as the New York Stock Exchange (NYSE) and Nasdaq.

Flutter Entertainment, CRH and Smurfit Kappa are some of the most recent examples of European companies that have withdrawn from their "home" stock exchanges in favor of US ones, according to the quoted source. At the same time, some companies from Great Britain, respectively from Europe, choose not to list on the continent at all, but to go directly to the stock exchanges in the USA for the launch of initial public offers (IPO). Dual listing, with a presence in both Europe and the US, is also increasingly becoming an option.

In 2021, On Holding, a Swiss brand of sports shoes, announced that it will be listed on the NYSE. At the same time, Wise Plc, a UK fintech, announced that it will start selling certificates of deposit in the US. Cryptocurrency miner Argo Blockchain has also opted for a US IPO.

In early September 2023, British semiconductor company Arm Holdings joined the wave, listing on Nasdaq after refusing to join the London Stock Exchange. The UK technology company returned to the stock market after a seven-year hiatus after being acquired by Japan's SoftBank. Also, Arm waited several months for the perfect moment for the listing.

The London Stock Exchange (LSE) has tried to become a global hub for shares again, but has failed despite increasing efforts by the UK government to persuade companies, especially technology ones, to stay closer to House. The number of companies traded on the London Stock Exchange has stagnated in recent years, according to the cited source.

The Arms Holdings case was particularly sensitive as the company had previously been listed on the LSE (and included in the FTSE 100 index) as well as Nasdaq before its acquisition and restructuring by SoftBank. In this case, British Prime Minister Rishi Sunak, as well as former Prime Minister Boris Johnson, and several representatives of the London Stock Exchange tried to persuade the company to accept a UK listing, or at least a dual listing option, but all it was in vain.

• USA, preferred for higher ratings and increased accessibility

The main attraction of the US stock market is the higher valuations, as well as the much larger markets that can be accessed. The US Inflation Reduction Act also earmarked billions of dollars for green and sustainable projects and industries. This has opened up new opportunities for UK companies operating in these sectors, while also becoming a temptation, the quoted analysis notes.

The US government has also made it easier for foreign companies to make investments in various sectors, unlike Britain, which is now trying to simplify some of its bureaucracy.

When it comes to UK technology companies, listing on Nasdaq is seen as a mine of opportunity, especially to attract more investment in the future. Semiconductor and AI companies have an additional advantage - the US offers more investment opportunities for this sector in an attempt to become self-sufficient in semiconductor production. This would also reduce US dependence on China and Taiwan for semiconductors.

Another reason for more European IPOs on US exchanges is that most of the private companies participating in the offerings are owned by American venture capital and private equity firms. As such, these firms prefer IPOs to take place on a US stock exchange, mainly due to their experience and comfort in US markets, according to Euronews Business.

In addition, US stocks dominate world markets, with approximately 70% of the MSCI World index being made up of US companies. These large firms, such as Apple or IBM, also have a much larger market capitalization than companies in Canada, Great Britain, Japan, Germany and France combined.

US economic growth has also been much faster than that of the UK or Europe, especially as Britain's economy lags behind many of its G7 partners. This allowed American stock markets, namely indices such as the S&P 500, to triple their value after the global financial crisis, while European stock markets or indices such as the Euro Stoxx 50 recorded a much slower growth.

US stock markets have also been boosted by huge gains in big companies like Nvidia, which have multiplied their earnings several times over the past few years.

That doesn't mean there aren't risks to the U.S. economy, according to the aforementioned analysis. This shows that the US Federal Reserve's monetary tightening policy is being watched closely, lest it send the US economy into recession.

In addition, as the Israel-Hamas conflict turns into a wider one in the Middle East, shocks to the prices of essential commodities such as food, energy and other raw materials could cause rising inflation and delays in the supply chain. supply.

At the same time, tensions in the semiconductor segment between the US and China have grown, in turn, in recent years, with the United States trying to further block China's access to sophisticated chips through export restrictions. China could well counter this with its own export sanctions, dealing a heavy blow to the US economy, according to Euronews Business.

• Europe must focus on mid-cap companies

Currently, stock exchanges in the UK and Europe could do a bit more to keep their companies "at home", focusing more on mid-cap and small-cap companies, according to the aforementioned analysis.

Thus, the region could include benefits such as more incentive measures, tax breaks, cheaper land, etc.

At the same time, in the long term, stronger regulations and a facilitation of investments for companies would be essential to help European stock exchanges stay afloat.

This is particularly important post-Brexit for the UK, as investors are already feeling uneasy about regulation and the viability of UK stock exchanges, according to Euronews Business.

The UK also has the added benefit of a strong established investor base due to the strength and history of its financial services sector, which is just waiting to be capitalised, the analysis concludes.