Aspen Insurance has became the latest company to choose to list on the New York Stock Exchange instead of the London Stock Exchange, mainly because of higher valuations and less rigid listing requirements in the US.
The London Stock Exchange (LSE) has been hit with a new blow following another key UK company, Aspen Insurance, a Lloyd’s of London underwriter, making plans to list on the New York Stock Exchange (NYSE) instead.
The listing is expected to be worth approximately £3bn (€3.61bn), and is expected to be completed in the next few months. Aspen has revealed that potential issues around differences in accounting practices between the US and the UK was the main driver behind this decision.
Major US investment banks such as Jefferies, Goldman Sachs and Citi have already been employed to help with this listing, with Aspen Insurance already having submitted the relevant paperwork in December.
This listing is expected to have an especially large impact on the UK stock market, as the latter has traditionally been home to a number of insurance firms, both large and small, over the years. London is also home to LLoyd’s of London, the biggest commercial insurance market globally.
With insurance companies such as Aspen Insurance now shunning the LSE in favour of other large stock exchanges, this robust reputation may suffer in the coming few months.
However, other London-based insurance companies such as Inigo and Canopius are also expected to launch their initial public offerings (IPOs) soon. If these companies choose to list on the London Stock Exchange, the latter could potentially experience a boost to balance out Aspen’s exit somewhat.
Why are UK companies looking to list in the US?
The London Stock Exchange has experienced a drastic drop in listing numbers over the past several months. This has largely been due to increasingly stringent listing rules and requirements, as well as declining liquidity and falling valuations.
Dampening demand for domestic stocks, as well as other major stock exchanges seeing relatively robust growth also contributed considerably to the LSE’s waning listings. The UK’s poor economic growth recently also exacerbated this situation.
Despite the LSE launching several reforms, which include removing premium listings and allowing companies more decision-making flexibility without shareholder approval, demand for UK listings has remained relatively low lately.
Conversely, the US provides a much deeper capital pool, along with a wider range of investors with larger risk appetites. It is also considerably more welcoming to tech companies, offering a range of grants and subsidies to the sector.
Furthermore, US listing requirements are relatively more relaxed, compared with the UK’s, while also welcoming companies from sectors which usually face a lot of backlash, such as oil and gas. This has also led to some UK oil and gas companies, such as Shell, considering a listing in the US.
