Why are firms choosing New York Stock Exchange over London?
The London Stock Exchange was hit by something of a bombshell in recent days.
Arm Holdings, long perceived as the jewel in the crown of UK technology, opted to reject London and instead move its primary stock market listing to New York.
Rene Haas, CEO of Arm, said in a statement: "After engagement with the British government and the Financial Conduct Authority over several months, SoftBank and Arm have determined that pursuing a US-only listing of Arm in 2023 is the best path forward for the company and its stakeholders."
The news served as a crushing blow to London's stock market, and came after CRH – one of the FTSE 100's biggest firms – revealed its own listing would be moving across the pond.
In a statement to the stock market, the Dublin-based building materials giant said it would aim for "US equity index inclusion as soon as possible".
And the bad news doesn't end there.
Speculation is rife that WANdisco, which has dual headquarters in both Sheffield and Silicon Valley, might also be looking at listing on the New York Stock Exchange alongside its London listing.
There is, understandably, growing concern that London is losing its appeal and no longer attracting the nation's most exciting tech companies.
Why are companies listing in New York?
Arm, founded in Cambridge, is a huge force in the semiconductor market.
Its processors can be found in the vast majority of smartphones across the globe, making it a prized asset for UK enterprise. Significant efforts have been made, therefore, to protect the company from foreign investment in recent years.
In 2021, the UK government intervened in the ultimately-doomed sale of Arm to US company Nvidia on security grounds.
When it became apparent that Arm's primary listing could be moved to the US, its parent company SoftBank was subjected to intense lobbying from politicians including the last three British prime ministers.
In the main, the decision of British and Irish companies choosing to list abroad boils down to value.
The New York Stock Exchange, for example, offers higher valuations and higher trading volumes, meaning investors can buy and sell without dramatically impacting the share price.
James Ashton, CEO of the Quoted Companies Alliance, which champions small and mid-sized publicly-traded businesses in the UK, said the US market carried opportunities for SoftBank to maximise Arm's potential.
Speaking to BBC Radio 5Live's Wake Up to Money programme, he said: "There is a valuation differential. You can see that whether you're a tech company or a shell. I think it's something to do with the type of investor, the mindset of investor that you see in London versus New York.
"To be specific on Arm, SoftBank need a hit. They've incurred billions of pounds of losses over the past few years.
"I think Arm is still the jewel in the crown of UK tech, regardless of where the listing is, but it's also the jewel in the crown of the SoftBank portfolio. If they think they can get a higher valuation in New York, they probably have to explore that.
"The shame is that this is a company set up in 1990, 60 miles from the London market. It's got a customer base to die for, and we should think about how we make sure the next Arms want to be listed here, and want to grow here."
The public versus private problem
Clearly, questions will be asked about what can be done to encourage big-name British businesses to stick with the London stock market.
Ashton argues that there are too many costs associated with being a publicly-listed company, as opposed to private.
Supermarket Morrisons is among the firms to end up in private hands, having been taken over by US private equity group Clayton, Dubilier & Rice for US$8.4bn in 2021.
However, arguing the positives for being in London, Ashton adds: "We think being public in London is a great place to be. There is huge upside to being a publicly-traded company.
"Companies listed in London can raise companies very quickly; they can operate transparently which is good for society, the people they trade with, their staff; and actually they can distribute the wealth fairly to investors.
"That said, there's a lot that's eroding that upside. We calculate that for a typical small-cap company, they're paying half a million pounds of cost every year, over and above what they might do if they were a similar-sized private company. A lot of that comes down audit cost, assurance, the cost of governance, listing and advisory costs. We think there's too much cost there attached to purely being public."