Turning to home
Thirdly, looking at the bigger picture, a lot of the hype around the US being a better market for companies to list focuses on the narrative around the access to liquidity and its breadth and depth of investor pools. Put quite simply, the UK will not and cannot compete with the offerings US listings provide.
Instead of looking to compete, those involved must look at making the UK a more attractive place for investment more generally.
For example, as the UK Share Association noted last year, the Treasury should look at tax reductions, notably around the stamp duty reserve tax (by which investors pay a transaction tax of 0.5 per cent), as one way to boost investment.
We would agree on the premise that this is an example of a tax that is only an obstacle to investment, and where its removal would only improve the attractiveness of UK equities.
The companies of tomorrow
Finally, the reforms are positioned around attracting the largest players and so called ‘unicorns,’ whereas more focus should pivot to the smaller markets of Aim and AQUIS. The companies of tomorrow are not unicorns, but small venture stage companies that need to be nurtured and brought through.
There must be a place for public venture capital, but Aim has made this difficult with its high costs, excessive regulation and a Nomad structure that hinders, rather than helps, liquidity.
Similarly, AQUIS is trying to support companies, but similar roadblocks appear. The FCA and LSE must turn to their peers (like CSE in Canada, First North in the Nordics, or even OTC Markets primary listings) on understanding the ways in which to best support early-stage companies, balancing appropriate investor protection but removing unnecessary regulation.
Venture companies are, by definition, higher-risk investments and require proportionate regulation as when supported by public capital.
At a wider level, the battle between New York and London does not need to be absolute. Companies can have the best of both worlds. They can remain national champions, list in their home market, and still access US investors – adding liquidity to the London listing, bridging the valuation gap, and supporting a global IR strategy.
By delivering this via cross-trading on a market companies achieve US access at a far lower cost and without needing to deviate from their home market’s regulatory rules. Winners created all round.
