The world’s oldest stock market Euronext Amsterdam has profited as the busiest European equities from the disturbance sown by Brexit surpassing London. The official name Euronext Amsterdam has benefited from rules allowing prospectus in English accessing border liquidity through six exchanges under the same ownership and openness to transformation such as special-purpose investment vehicles. Money raised through initial public offerings has been a big hit this year. Even though it is situated in London, the biotech business Benevolent AI aims to list there via the continent’s largest planned Spac merger. There is a fightback from the London Stock Exchange. Having substantially hosted IPOs in total, and the recent announcement of Shell scrapping its dual listing from the Dutch exchange and moving its shares and tax residence to London. However, Amsterdam and London’s rivalry is being missed to a larger extent. The real action has increasingly moved somewhere else. The US, the Chinese, and Hong Kong markets are leaving Europe in dust through equity trading, corporate bond issuance, and every other metric that matters.
According to Dealogic, all the exchanges of the European Union and the UK combined have seen 389 IPO’s while the US market alone has 954 IPO’s. According to a think-tank, New Financial, of the total global market capitalization since 2006, the domestically listed Asia Pacific and American companies have grown significantly, while those European companies, including the UK and Switzerland, have shrunk 30% to 17% of the total. According to its managing director, Willian Wright said that longer-term trends are frightening. The US and Asian markets are much more vibrant economic breeding grounds. There is no lack of innovative start-ups in Europe. Because the continent’s economy grows more slowly and the national borders make it more challenging to scale up, the global investors have traditionally discounted their revenue potential somewhere else. This is a golden opportunity for the European Union to change the narrative. From 13% to 19% of global venture capital funding was drawn to European start-ups in the first nine months of the year 2020. By comparison, Europe appears to be more inviting. China is tightening down on foreign investment and technological companies, and many private American companies are valued at excessive levels. However, it also reflects the EU’s and the UK’s increasing success in fields like fintech and biotech. The great majority of this year’s venture capital funding is late-stage capital, which has more than tripled to $60 billion. As a result, several of the beneficiaries will be trying to go public in the near future. Most important groups have historically been attracted to US exchanges by a large investor pool and more active trading, particularly among retail investors. According to Dealogic, 60 EU and UK companies have been listed in the US in the last five years, while only 16 companies are listed in the EU and UK.
The British policymakers are trying to make the UK more investment-friendly. In order to woo the entrepreneurial companies in the UK, the Financial Conduct Authority changed its Spac rules in August and finalized a broad overhaul of its listing regime last week. Founders who opt to list on the premium portion of the market will be able to hold shares with improved voting rights and sell only 10% of their stock to the general public, down from 25% previously. Due to its size, the EU has a natural advantage. For years Brussels talked about a true cross-border market for financial services without delivering it. Companies find raising money at home with such a capital markets union easier. According to the recent proposal, the creation of live database patchwork to unify more than 400 trading venues is called consolidated tapes. The enthusiasm of the new German government has given this a boost. However, swift action is required, not just on stock market regulations. Europe needs to make it easier for businesses to scale across borders. Across 27 countries, it takes time for administration, taxation, rules, and regulation to be harmonized. There is a need for a common overlay or sandbox where European standards are met by the fast-growing companies and then enter all EU countries at once, said Jan Mischke, McKinsey Global Institute.
Amsterdam’s win over London will be hollow if Brussels drops the ball.