Tui Group, the German travel company, is urging investors to support its plans to delist from the London Stock Exchange. Concerns over low valuations and a lack of liquidity have prompted an exodus of firms from the troubled bourse, leading Tui to seek a primary listing on the Frankfurt Stock Exchange in June 2024.
The airline, headquartered in Hanover, aims to enhance liquidity and simplify its ownership structure following a shift in the market. Recent years have seen 77% of all trading in Tui shares occur in Germany.
Despite a challenging market environment, Tui has managed to outperform analysts’ expectations. In fact, the company reported a 14.7% increase in revenues to a record high of €4.3 billion, leading to a 1% rise in Tui shares on Tuesday. However, these shares have still experienced a 33% decline over the past year.
To proceed with these proposals, Tui now requires the support of a supermajority of 75% of its shareholders. The vote will be held during the company’s annual general meeting (AGM) on Tuesday.
This move by Tui will further weaken the London Stock Exchange, which some analysts believe is stuck in a downward spiral. The lack of initial public offerings (IPOs) on the LSE has resulted in reduced liquidity and ultimately lower valuations. As a result, investors are increasingly withdrawing their funds from U.K. equity funds.
In response to these concerns, London Stock Exchange Group CEO David Schwimmer refuted the idea that Britain’s top market is diminishing. Instead, he attributed the current challenges to the broader global macroeconomic climate.
Tui Group’s proposal to delist from the London Stock Exchange highlights an ongoing issue for the bourse. With major companies opting to steer clear, the LSE faces significant obstacles in revitalizing its appeal to investors.
The State of the London Stock Exchange
The London Stock Exchange (LSE) has been facing challenges as companies opt to turn away from the market due to concerns over the executive compensation practices in the UK and the negative media environment. This has led to a decrease in valuations and a lack of liquidity, contrary to popular belief.
Numerous top companies have made decisions to switch their primary listings to US markets or completely avoid the UK exchange by conducting their initial public offerings (IPOs) in New York. One such blow to the LSE was British microchip designer Arm Holdings’ decision to list on the US Nasdaq in August 2023. Despite extensive efforts by the UK government to persuade the company to launch its IPO in London, Arm Holdings chose the US market instead.
Additionally, two of Ireland’s leading companies, building materials seller CRH and cardboard packaging maker Smurfit Kappa, decided to switch their main listings to the New York Stock Exchange in 2023, further undermining the LSE.
The decision by Irish gambling giant Flutter Entertainment to switch its secondary listing from the Euronext Dublin to the NYSE in April 2023 raised concerns that the FTSE-100 company may eventually drop its primary London listing.
To exacerbate its problems, the LSE has experienced a series of trading halts due to outages in recent years. Critics argue that the market has become too focused on its data and analytics business, which currently generates the majority of firm-wide revenues following the acquisition of Refinitiv for $27 billion in 2021.
In light of these issues, it is clear that the LSE needs to address its challenges and rebuild confidence in order to regain its position as a leading stock exchange.