The London Stock Exchange’s quest for a post-Brexit renaissance took a curious turn today as a SpaceX co-founder delivered a rousing endorsement of the British market. The event, a listing ceremony for a new space technology fund, saw the entrepreneur proclaim London as a ‘natural home for innovative capital’ moments before the opening bell. For the LSE, desperate to stem the tide of companies defecting to New York or Frankfurt, this was manna from heaven.
Let’s be clear: the LSE is in a fight for relevance. Since Brexit, the number of London IPOs has dwindled to a trickle. High-growth firms, particularly in tech and biotech, have voted with their feet, lured by deeper pools of capital and more generous valuations across the Atlantic. The exchange’s response has been a mix of regulatory tweaks and desperate cheerleading. Today’s event was the latter in spades.
The SpaceX co-founder, whose name I won’t bore you with if you follow the space race, lauded the ‘stability’ of British markets and the ‘sophistication’ of London investors. One can only assume he was looking at the same gilt yields I am. The 10-year yield hovering around 4.2% is a far cry from the near-zero rates that inflated asset prices before the inflationary storm. Still, for a company whose primary business involves launching expensive rockets into orbit, perhaps a bit of financial gravity is welcome.
But let’s examine the substance beneath the spin. The fund listing today is not a tech unicorn but a vehicle for investing in satellite infrastructure. It is asset heavy, capital intensive, and offers returns that are, at best, long-dated. This is precisely the kind of listing the LSE has historically done well: infrastructure, natural resources, and old-economy plays. The question remains whether London can attract the next Tesla or the next BioNTech. The answer, based on current flows, is a resounding no.
Meanwhile, the broader market backdrop is unhelpful. Inflation, while down from its double-digit peak, remains sticky at 3.2%. The Bank of England is in a cautious dance, cutting rates at a glacial pace for fear of reigniting price pressures. This tight monetary policy is a headwind for equity valuations, particularly for growth stocks that rely on discounted future cash flows. Capital flight towards US treasuries, offering a 4.5% risk-free return, only exacerbates the drag.
Of course, the LSE’s cheerleaders will point to the successful listing of Arm Holdings in New York as an anomaly, not a trend. But the numbers tell a different story. Since 2021, London has lost over £100 billion in market capitalisation to US exchanges via de-listings and transfers. The pipeline for new issues remains thin, with only a handful of sizeable floats expected this year.
The government’s response has been characteristically interventionist. The Chancellor’s ‘Edinburgh Reforms’ promised to slash red tape, including a relaxation of the prospectus rules for dual-class share structures. The idea is to make London more palatable for founder-led tech firms. But these are marginal tweaks. The real issues are structural: a domestic investor base that is risk averse, a pension fund industry that prefers bonds over equities, and a regulatory culture that stifles innovation.
Until those deeper problems are addressed, today’s rallying cry from a SpaceX co-founder will be little more than a pleasant distraction. The LSE can pat itself on the back for a well-publicised listing. But the hard numbers on capital flows and market depth suggest the battle for relevance is far from over. For now, the City will take whatever victories it can get, even if they come wrapped in rocket fuel and hype.
