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LSE boss says London must ‘move quickly’ to attract prized companies

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The head of the London Stock Exchange Group has warned that the government must move quickly to overhaul the UK’s listing rules if it wants to challenge Wall Street for the next wave of tech companies going public.

The message from David Schwimmer, who has led the LSE since 2018, comes as a review of the rules for company listings by former EU commissioner Jonathan Hill is due to be published next month.

Commissioned by the government last November, the review will report amid a divide in the City over how far the listings regime should be relaxed to attract companies from sectors, such as tech, that have an ever bigger role in modern economies and increasingly dominate the US stock market.

Corporate governance advocates are determined to uphold the gold standard of rules in the UK, while others believe a more radical overhaul is needed to compete against rival destinations for initial public offerings such as New York and Hong Kong.

“I think it’s worth looking at changing these rules, not doing it in a way that is a race to the bottom from a governance perspective, doing it in a thoughtful way,” Mr Schwimmer told the Financial Times.

“I think it’s important in terms of getting that right and doing it quickly because if you want to list, it’s a very competitive market. You have a lot of options,” he added.

The intervention from Mr Schwimmer comes as the LSE prepares on Friday to complete its $27bn acquisition of Refinitiv, the data and trading provider, in a blockbuster deal that will turn the 322-year old bourse into one of the largest providers of the market infrastructure and financial data.

Mr Schwimmer said the biggest takeover in the LSE’s history would “completely change how we interact with our trading customers” but insisted that share trading would always be a core part of the £31bn group.

On the UK’s listings regime, much of the debate has centred over the rules that apply to the top tier of companies floated in London, or so-called premium segment.

Mr Schwimmer said that existing rules requiring start-ups, often owned by a founder or a small number of investors, to sell a minimum of 25 per cent of their company are a deterrent to potential IPO candidates.

The former Goldman Sachs banker also backs the introduction of dual-class share structures, which allow founders to keep greater control of their businesses and are common in the US.

“Those are issues that are important to companies that are looking to list,” he said. “The UK has a great environment for technology companies, for fintech companies and for science and biotech companies. We should not have a regulatory regime that pushes them to go to other markets because our listing regime has some rules that have not adapted in recent years.”

The intervention from David Schwimmer comes as the LSE prepares on Friday to complete its $27bn acquisition of Refinitiv © Toby Melville/Reuters

Mr Schwimmer also stressed that the LSE was still committed to the EU market. To win approval for the Refinitiv deal from competition regulators in Brussels, the LSE agreed to sell Borsa Italiana, the operator of the Italian stock exchange, to rival Euronext for €4.3bn.

“We did not want to sell Borsa Italiana,” he said. “If anything, the Refintiv transaction represents a doubling down of our presence in the EU. There’s no sense that the divestiture of the Borsa Italiana assets is any kind of departure for the LSE.”

The Refinitiv takeover will at a stroke triple the group’s revenues to £7bn. It has also delivered a payday to advisers on the deal, who will share $1.1bn in fees for advice and arranging its financing.

Refinitiv’s previous owners, a consortium led by private equity firm Blackstone, will hold a 37 per cent stake in the enlarged company.



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Investors push back against UK listings overhaul

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London’s biggest fund managers have pushed back against proposals to liberalise the City’s stock market listings regime, saying changes aimed at luring in technology businesses and special purpose acquisition companies risk “watering down” investor protections.

A report by Lord Jonathan Hill, published on Wednesday, recommended allowing dual-class share structures for companies admitted to the London Stock Exchange’s “premium” segment, and lowering the limit on the free float of shares in public hands from 25 per cent to 15 per cent, meaning founders need to sell less of their business to list it. He also laid out proposals to make the UK a stronger potential venue for listings of blank-cheque companies known as Spacs.

UK companies and the country’s main listings venues, the LSE and Aquis Exchange, said the plans were vital to improving London’s attractions in a globally competitive market. But some investors are nervous.

Chris Cummings, chief executive of the Investment Association, the trade body that represents asset managers with a total of £8.5tn in assets, said the proposals were an “important first step”, but he warned that the UK needed to ensure “appropriate investor protections for minority shareholders”.

One large investor in UK-listed companies said it was strongly opposed “to the watering down of rules governing premium listing”. “Shareholder protections should not be used as a bargaining chip to prove the UK is open for business,” the investor said.

Another large global asset manager said the current standards for premium listings, including the principle of “one share, one vote”, were “critical”.

“The UK has gold standards for stewardship,” the fund manager said. “If we are going to create more flexibility for a listing, we would want over time [for companies to] work towards a premium listing with ‘one share, one vote’ and standard free float with sufficient liquidity.”

Some asset managers took a more upbeat view of the Hill review.

“Schroders is in full support of Lord Hill’s review. It is crucial that we do all we can to make the UK the most attractive place for companies to list and to do business for the benefit of investors,” said Peter Harrison, chief executive at Schroders, the biggest listed UK fund manager.

Hill’s proposals are intended to boost London’s global standing as an equity market, which has weakened in recent years as the US and Hong Kong have swept up the majority of in-demand tech listings. New York’s markets have also gained a boost from a wave of Spacs, which raise money from investors and list on a stock market, then look for an acquisition target to take public.

The departure of some large technology stocks such as Arm in recent years has cemented the blue-chip FTSE 100 index’s bias towards financials, energy and mining stocks. A loss of trading businesses to European rivals since Brexit has also further dulled the allure of the City.

The Hill recommendations are “smart, pragmatic measures”, added Sir Martin Sorrell, whose S4Capital digital market and advertising business has a dual-class share structure. “[It] also signals that the government’s ‘Singapore on Thames’ vision for a post-Brexit Britain is on the way to becoming a reality,” he said.

Makram Azar, chief executive of Golden Falcon, the European technology blank cheque company that opted to list in New York, said London needed to make significant structural changes.

“The recommendations will no doubt spur investors to look at listings on the LSE in the future. It will take time to develop the whole ecosystem around Spac listings in London, but this is the start of the sea change that’s needed.”

Others cautioned against the risks of making changes to attract blank cheque companies.

“Spac deals may be booming in the USA right now, but fear of missing out is just about the worst possible reason for making any investment decision,” said Russ Mould, investment director at stockbroker AJ Bell. “It is therefore to be hoped that the FCA maintains its critical faculties when it assesses Lord Hill’s proposals and the safeguards that he offers alongside them.”



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Oscar Health raises $1.4bn from stock market listing

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Oscar Health, the health insurance company co-founded by Joshua Kushner, raised more than $1bn in an initial public offering that topped the company’s marketed price range, in a sign of investor confidence despite political uncertainty over the future of US healthcare.

The New York-based company priced its shares at $39 each on Tuesday, according to a statement, raising about $1.4bn. Oscar would have a market capitalisation of $7.9bn at that price, based on the total number of shares outstanding.

Oscar previously said it expected its listing share price to range from $32-$34 before increasing the range to $36-$38 on Tuesday. Coatue Management, Dragoneer Investment Group and Tiger Global Management — existing investors in the company — had indicated interest in purchasing up to $375m of shares in the offering.

The move demonstrated that investors are relatively unfazed by potential headwinds for the company. President Joe Biden has vowed to reform the US healthcare system and the Supreme Court is considering a decision on the fate of the Affordable Care Act, known as Obamacare, both of which could pose significant challenges to Oscar’s operating model.

Oscar was co-founded in 2012 by Mario Schlosser and Joshua Kushner, the brother of Jared Kushner, Donald Trump’s son-in-law. Kushner’s venture firm, Thrive Capital, owned a stake that would be worth $1.3bn at the offering price and give it 75.9 per cent of the company’s voting power.

Oscar, which bills itself as the first health insurance company “built around a full stack technology platform”, has more than half a million paying members and offers its insurance plans in 18 US states.

But the company has struggled to become profitable. In 2020, it recorded widening losses of more than $400m on revenues of about $460m, a decline from almost $490m of revenues the previous year.

Oscar’s IPO came on the heels of several other public market debuts for “insurtech” groups in the past year, which fuelled an already strong run of stock market listings.

Clover Health, which uses data analytics to connect senior citizens to Medicare Advantage plans, merged with a special purpose acquisition company, or Spac, sponsored by former Facebook executive Chamath Palihapitiya in a $3.75bn deal in October. Lemonade, which sells rental, homeowners and pet health insurance, went public last summer in what turned out to be one of the year’s most successful stock market debuts.

Oscar is highly sensitive to any changes to Obamacare, which lawmakers have wrestled over since it was written into law in 2010. Almost all of the company’s revenue comes from plans subject to Affordable Care Act regulations, according to its prospectus.

President Joe Biden’s healthcare programme would leave Obamacare largely intact, but would make some adjustments and add a public option for all Americans. The Supreme Court, meanwhile, is expected to announce a decision on yet another review of the Affordable Care Act in the coming months.

Goldman Sachs, Morgan Stanley and Allen & Co led the offering.



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Spac led by tech founders targets Europe’s unicorns for US listings

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Tailwind International, the New York-listed special purpose acquisition company, is searching for European tech unicorns to list in the US as part of plans to bypass EU and UK markets and build a multibillion-dollar franchise of Europe-based businesses.

Tailwind, which says it is the first Spac where a group of European tech founders will focus on investing in the region’s tech companies, raised $345m on the New York Stock Exchange last month with the intention of taking a European tech group public in the US. 

Tommy Stadlen, co-founder of venture capital fund Giant and the Spac’s chair, said: “We will bring one of Europe’s iconic technology companies to the US public markets.”

Pierre Denis, former Jimmy Choo chief executive and Coty board member, is the chief executive. Nathalie Gaveau, co-founder of French ecommerce site PriceMinister, is president and other sponsors include the co-founders of luxury online retailer MatchesFashion and German meal kit delivery business HelloFresh.

Philip Krim, the co-founder of online mattress start-up Casper, is a co-founder.

The number of Spacs — which list on the stock exchange before they find a business to buy — has grown rapidly in the US in the past few months as investors have piled in with the hope of acquiring stakes in promising target businesses.

In February alone a total of 174 Spacs filed or priced for expected gross proceeds of $56bn, according to data from FactSet.

So far this year, there have been more than 180 Spac filings, against last year’s total of nearly 250, which was the highest in five years.

European tech groups, including the UK’s used car site Cazoo and health app Babylon, have already held talks with US Spacs

The Tailwind team is planning to launch a series of Spacs to build out the franchise. The minimum size of any target would be $1bn, Stadlen said, ranging up to $15bn, with the potential to raise additional equity.

He said the UK would be a focus owing to the larger numbers of promising tech companies, alongside France, Germany and the Nordic nations.

In a sign of booming demand among investors, Tailwind increased the size of the listing from $250m to the maximum of $300m, and also exercised the “greenshoe option” that allowed its underwriters to buy up further shares, taking the total to $345m. People close to the process said there was $3bn of demand for the initial public offering. 

Stadlen said Tailwind would have an advantage in being run by tech founders — pointing out that operator-led Spacs outperformed peers — and that a “multi-Spac” platform was more likely to succeed because of access to resources.

Tailwind has already had conversations with European venture capital firms and founders to discuss potential US listings of their businesses, he said.

He added that European exchanges had been unattractive to tech listings because they offered lower potential returns. Only two have listed in Europe so far this year, according to Refinitiv. A US Spac offers founders access to US markets where there were “more capital and better valuations”. 

Bankers in London are keen for the UK government to change the listing rules on Spacs to compete with New York and rival cities in Europe. At present, a Spac acquisition in the UK is considered a reverse takeover and the shares are suspended. Trading cannot resume until a deal prospectus is published, for which there is no specified deadline, so investors who want to sell their shares can find themselves locked in.

Bankers in London have talked up Amsterdam as Europe’s hub for Spacs, while German venture capitalist Klaus Hommels launched a European tech-focused Spac, Lakestar, in Frankfurt last week, the first on the Xetra market in a decade.

“We are open to Spacs as a product and have all the conditions in place for more of these to go public in Germany. They have been the go-to topic in most calls with issuers, banks, and lawyers over the past six months so we expect Spac listings to accelerate in Europe,” said Renata Bandov, head of capital markets at Deutsche Börse.

“In the post-Brexit environment, UK-listed companies cannot currently passport their prospectuses into the EU so we anticipate a higher influx of dual listings.”



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