Changes aim to make FTSE more attractive
THE stock market should be one of the barometers of an economic health and vitality. However, this is not necessarily the case with the FTSE 100 as it is mainly made up of international companies, rather than domestic companies.
The UK has been in the shadow of its American cousin, the Nasdaq. Since the Second World War, America has overshadowed the UK whilst the sun set on the British Empire.
This has meant that America, through the dollar, has the global currency of choice and its stock exchange, the Nasdaq, is sought after by high profile companies throughout the world seeking access to capital markets.
There are many examples of the UK continuing to lose out to the US on listing, and now even to Frankfurt with TUI looking to leave the FTSE 100. TUI does have Germanic roots, though, so this move could be attributed to that.
The FTSE 100 is less attractive to the world at large due to the existing regulations seeking to protect investors, rather than allowing
companies to find capital. Hence, the changes proposed by the UK regulator will go some way to make the FTSE 100 a better place to list with less regulatory constraints, and this will pay dividends in listing terms.
In America, there is no shame in failure, whilst in the UK, this carries stigma.
If you do not fail, you have not tried, so you learn from failure to try
again. You cannot simply look to protect the consumer at every turn.
It goes without saying that simplification leads to cost savings and to the world at large, having one listing category rather than a premium standard makes sense.
Also, in this era of unicorns, eligibility should not be determined based on long-term financial history. That is why the stock exchange has to be opened to all entrants.
This new disclosure regime may not suit all, but it is ideal to allow investors to decide how they want to invest, rather than treating them as not able to make a decision and to be fully protected at all times, failing which, they should go to a professional to mitigate financial risk.
It also makes sense that with a more diverse, and wider range of investors, voting on business matters should be limited to de-listing and takeovers, rather than related party transactions.
Will all of these changes make London more competitive? But only if it simplifies the prospectus requirements, allows more equity research, and incentivises capital investment in the market, whether through pension funds or ISAs.
We should also remember that notwithstanding that the UK may be losing its shine, the American stock market is dominated by the Magnificent Seven.
The Magnificent Seven are Alphabet (Google), Amazon.com, Apple, Meta Platforms (Facebook), Microsoft, Nvidia (artificial intelligence) and Tesla which together represent about 40% of Nasdaq. Maybe that is why companies like Raspberry Pi were wooed by
America but have remained in the UK as they do not want their voice drowned out by a deep market.