The city remains a beacon of innovation

The decline of London as a financial hub has been a theme in recent commentary, but a run of companies pulling their stock listings points to the city evolving, not dying.

The tsunami of moves off-market — including private equity market buyouts — is a sign of how innovation will always unite investors chasing returns with companies that need capital. Below the radar a fascinating sub-story is at play as disruptors such as JP Jenkins look to find ways to accommodate the liquidity needs of issuers who are no longer willing to squeeze themselves into the straitjacket of rules now tying up traditional capital markets.

Policy makers have been making an effort to find more progressive solutions, but events so far are moving faster than alternative approaches, especially in the high-growth areas politicians are keen to attract.

Alternative trading venues are nothing new. But with daily reports of major companies such as ARM, CRH and Flutter taking their primary or secondary listings abroad, or going back into private ownership, it seems timely to serve up a reminder that the city already has many right-sized options closer to home. Firms such as JP Jenkins provide a stepping stone for the high-growth businesses of tomorrow. Less onerous reporting rules mean lower overall costs both for the initial admission and then to meet ongoing obligations, offering a genuine alternative to opting for a trade sale.

Critically, this approach also allows early-stage investors the choice of realising some value immediately, while still retaining a degree of ownership. And don’t forget that with the current levels of uncertainty, there’s no shortage of businesses who may be looking wistfully at an Initial Public Offering (IPO) but don’t want to take the plunge just yet. Alternative routes such as JP Jenkins allow for companies to take their time in the IPO preparation phase, obtain a registrar and start to act like a public company. These companies can feel comfortable in an environment away from volatility and wide bid/offer spreads. This takes us back to the core point: in capital markets, one size will never be a good fit for every business.

Indeed, back in the late 1990s, amid the unprecedented frenzy that led up to the dot.com bubble and heightened levels of market turmoil, the alternative London venue OFEX saw a significant surge in popularity as many investors accepted that the certainty that had been previously provided by the main board could no longer be relied upon.

Capital markets never stop evolving. Technology has been a driving force here in recent years, as is the exceptionally high quality of talent. London’s recent delistings show the tide is turning on how companies want to raise capital. It does not show that confidence is flowing out of the market.

The City continues to act as a beacon when it comes to innovation. Some forms of capital allocation will brighten as others grow dim. In a fast-evolving world it is difficult to see London’s shining light ever being extinguished.

Find out more about the IoD Finance and FinTech Group here.