INVESTING EXPLAINED: What you need to know about primary listings – the stock market where a company’s shares first went public
In this series we debunk the jargon and explain a popular investment term or theme. Here are the primary entries.
What is this?
A company’s primary listing refers to the stock market on which its shares were first listed when it went public. It is also possible to have a secondary listing on another market.
This strategy gives a company access to a larger pool of capital, which is why so many larger companies benefit from this arrangement.
However, the secondary listing market (usually New York) is starting to look more and more hospitable than the primary listing market.
Value: More and more UK companies are keen to swap their primary listing from London to New York
Why are we reading this now?
More British companies are keen to swap their primary listing from London to New York, where they believe their shares would be more generously valued due to the greater amount of capital available.
Company bosses may also hope to benefit from higher executive pay in the US, although this is rarely the reason given for the move.
Who is leaving Britain?
The latest is gambling giant Flutter, owner of Betfair, Paddy Power and Poker Stars. At this week’s annual general meeting, Flutter shareholders approved the move in New York. In its defense, Flutter can say that the company has expanded in the US.
Flutter follows the lead of several others. Travel organization Tui has exchanged London for Frankfurt. Construction supply company CRH and pharmaceutical company Invidior have rejected London in favor of New York. Shell has threatened that she would be the next to leave.
Any plans to move?
A group of Glencore shareholders have started calling for a move to Sydney as the mining group’s shares have underperformed in London.
Who loses?
The departure is clearly damaging to London, especially as the London Stock Exchange struggles to attract new listings to replace the companies that have exited in the hope of becoming objects of desire elsewhere.
The government made proposals last summer to tackle this problem. But unless the problem can be resolved quickly, London’s stock markets could be in jeopardy.
Charles Hall of estate agent Peel Hunt even claims that the UK market is ‘dying’.
Such an outcome would be particularly damaging to smaller companies, which would normally have made their market debut in London.
Does this only affect London?
No. French oil giant Total may say ‘au revoir’ to Paris on its way to – you guessed it – New York, arguing that the transfer would help narrow the valuation gap between Total and the US petroleum names.
Who is to blame for this?
The London Stock Exchange has played a role. A primary listing in New York appears to offer investors more capital. But British pension funds and institutions are also in the dock for their failure to support British listed companies. The holdings in such companies constitute only about 4 percent of their portfolios.