Don’t let IPO row endanger London

David Hellier
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GRAFF Diamonds, one of the most famous jewellers in the world, is based in New Bond Street, Mayfair. Its headline web-page promotes London as a sign of its class. And yet its forthcoming flotation, in which it hopes to raise $1bn, is all going on in Hong Kong. There isn’t even a secondary listing in London.

When Manchester United recently explored the idea of an IPO, it too had the Far East in mind as the best place to market its shares.

Neither group, despite their brands being among the best that Britain can offer, considered London as the best place to float their shares. And a look at the pipeline listed daily in the influential IFR confirms that London is not exactly flavour of the month at the moment when it comes to lucrative share issues.

So it is perhaps not the best time for pension fund representatives and other institutional shareholders to be campaigning for tighter listing rules in order to enhance investor rights.

The issue has come to the fore because of the high number of foreign-owned resources groups that have – fortunately – chosen London as the place to list their shares. It is also an issue because of the large number of floats that have resulted in losses for many of those brave enough to buy shares.

If the likes of Glencore, Essar Energy and Evraz had shunned London like Manchester United and Graff have done, then the City’s investment bankers would have had even more time on their hands than most of them do now.

But the result has been a growing influence in the FTSE indices of companies under foreign ownership, controlled often by dominant foreign (often Russian) shareholders.

FTSE, the index compiler, earlier this week raised the free float threshold for inclusion in its UK indices from 15 to 25 per cent. But this does not seem to have satisfied some in the corporate governance lobby who are now campaigning for the limit to be raised to 50 per cent.

The lobbyists have the feel of the Tory Eurosceptics about them. Having won a major victory in a long-running battle, they now scent blood.

But in this case any further tightening of the rules will be a big blow for the City’s chances of gaining ground on its biggest rivals. As FTI Consulting’s John Waples writes on page 20, the UK has enough problems on its plate without the need to sideline itself as a financial capital.

Even before the City workers at Evolution and Investec have learned of their fate following the merger of their two firms, the small-cap broking and investment banking sector is set for another seismic change.

Yesterday the Canadian group Canaccord announced an agreed merger with Collins Stewart Hawkpoint, one of the doyens of the small- to mid-cap sector, for £253m.

The deal follows a major consolidation and contraction in the sector, with Altium, Man Financial, Matrix, Arbuthnot and Unicredit among those either being restructured or closed down.

The new group boasts of having 153 corporate clients and will see Canaccord accede to a main (as opposed to Aim) listing on the London market. There are bound to be job cuts, with those working in trading and equities especially vulnerable.

Allister Heath is away