There is only one topic being talked about in the darkest corners of the City – rumours that Nasdaq, America’s biggest stock exchange, is sniffing around London’s junior Alternative Investment Market.
Insiders say speculation has been buzzing for several weeks that the US group is eager to do some sort of deal with the London Stock Exchange Group (LSEG) to buy AIM and bolster its European operations.
Nasdaq executives are said to believe the timing could not be more fortuitous, coming as the LSE is itself under pressure after a number of high profile corporate defections to Wall Street while the number of companies delisting from AIM gathers pace.
So far this year, only one company has joined AIM compared to ten listings last year.
And the latest data from the LSEG shows that over the last year, the number of AIM listed companies dropped by 70 to 738 at the end of March, a fall of nearly 10 per cent. In 2007 there were 1,700 companies.
Target: Insiders say speculation has been buzzing for several weeks that Nasdaq is eager to do some sort of deal with the London Stock Exchange Group to buy Aim
Among the main criticisms from AIM advisers – known as nomads – is that the cost of listing for young, dynamic companies is far too high, about £500,000 at the last count, and that regulations are too tight and onerous.
Staying private is becoming the preferred option for small and medium sized enterprises (SMEs).
It is not known whether an approach has been made to the LSE, or if interest is still at an earlier stage.
Nasdaq has yet to comment despite attempts to contact its European head office in Stockholm.
What’s for sure is that Nasdaq’s European operations have been growing fast. Adding AIM – despite its problems – would put rocket boosters under its network, which includes seven exchanges, including those in Sweden, Denmark, Iceland and Finland.
More than 1,000 companies are listed on Nasdaq’s European exchanges and it employs 1,600 staff across 14 European countries.
Nasdaq has always had grand UK ambitions. Those with long memories will recall the US exchange launched two hostile takeover bids for the LSE itself, the last one in 2007.
Nasdaq went on to acquire the Swedish OMX group, using Stockholm as its springboard into European markets.
It may well be that the latest rumours are over-excited gossip. Yet the mere fact that such chatter is taking place is indicative of the growing fears over the City’s long term future as one of the world’s most international markets.
Here’s a shocking figure showing the decline. In 2000, UK-listed equities made up 11 per cent of the MSCI World Index – which tracks more than 1,500 companies which account for most of the global stock markets by value. Today, that is down to 4 per cent.
Citi research shows the MSCI United Kingdom Index, which tracks 80 of the biggest UK-listed firms, trades at a nearly 40 per cent discount to the 625-strong US Index.
The reason is the extraordinarily low valuations being put on UK companies – big and small – and one of the factors driving the recent flood of takeovers either by US companies or private equity.
Some economists reckon UK stocks are undervalued by at least 20 per cent compared with their international peers.
Nick Train, one of the UK’s leading fund managers and stock pickers, went further earlier this week, describing valuations of British companies as ‘egregiously low’ and that one way to wake up investors would be if a takeover were launched for a giant UK blue chip.
Train, whose fund has a 4 per cent stake in the LSE, added: ‘Sometimes you need a cathartic event to turn the tide.’
He is right. Just the rumours alone of possible interest in AIM should be an even bigger wake-up call. Taking AIM away from the LSE might be the way to restore its reputation. The Americans should not be the ones to do so.
Two-way traffic
Bravo for the French boss of JD Sports, Regis Schultz, for being bold enough to take the FTSE 100 company across the Atlantic with his deal to buy sportswear chain Hibbett.
And it is a big deal, doubling the number of stores owned in the US by the sports fashion retailer to 2,100.
The history of UK retailers in the US isn’t great. Think Marks & Spencer and Tesco.
But Schultz has already built up a footprint. What’s more, Hibbett is listed on the New York exchange.
So that’s one down for Wall Street.
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