London Stock Exchange: A Gateway to Global Markets for APAC FintechsMay 16, 2023 0 comments
In recent years, the Asia-Pacific (APAC) region has been at the forefront of the FinTech revolution, with many innovative companies disrupting traditional financial services.
For APAC FinTech founders and their investors, the decision to raise capital through an initial public offering (IPO) is a significant milestone in their journey toward growth and expansion.
The London Stock Exchange (LSE) remains a popular option for international companies looking to access global capital markets. Approximately 40 percent of the companies listed in London are international in nature.
A listing on the LSE can be an option for growth companies seeking to raise capital and achieve their long-term strategic objectives, and benefit from access to a large pool of international investors. However, it is essential to address several unfounded myths surrounding the costs and regulatory requirements associated with a London listing.
Despite this growing trend, some common misconceptions remain surrounding the costs and regulatory requirements associated with a London listing. This has led some companies to overlook the LSE as a viable option for fundraising and expansion, potentially missing out on the benefits of accessing a large pool of international investors and a more established capital market.
Affordable listing on the London Stock Exchange
A common misconception is that a listing on the LSE is an expensive endeavour that only large companies can afford however, this view is not accurate. Although there are costs associated with listing on the LSE, including initial fees and ongoing compliance costs, they are generally lower than those of other major financial centres. Furthermore, the LSE offers a range of markets tailored to different types and sizes of companies, including AIM, specifically designed for smaller, growth-oriented companies.
This provides a more affordable option for growth companies looking to raise capital through an initial public offering while still gaining access to the benefits of a London listing. This is evidenced in companies such as the founder-led mobile payments company Fonix Mobile, which raised £45 million in 2020 at a market capitalisation of £90 million and is now valued at around £200 million.
Valuations are not market dependent
Despite the commonly held notion that a company’s valuation will be lower on the London market, the truth is that its valuation will primarily be determined by its underlying fundamentals, such as revenue, earnings, and growth prospects. For example, Wise went public on the LSE in July 2021 via an £8.75 billion direct listing, and its shares trade at a premium to its US peers primarily due to its growth and margins.
As one of the world’s oldest financial centres, London has a wealth of analysts and investors that have backed companies from sectors such as financial services through multiple fundraising cycles. Investors have also backed payments businesses such as Datacash, Worldpay, Paysafe, Safecharge, and Earthport and are continuing to support a new wave of FinTech listings, including Wise, LendInvest, and PensionBee.
Access to permanent capital for growth
A critical advantage of a public listing is that it provides companies access to permanent capital to support their growth ambitions. Unlike private equity or venture capital funding, which typically has a limited lifespan, a public listing provides a company with a long-term source of capital that doesn’t need to be repaid.
This is particularly important for FinTech companies, which often require significant investment in technology and infrastructure to remain competitive. By listing on the LSE, companies can access a deep pool of institutional and retail investors willing to invest in growth companies.
The majority of transactions and capital raised in London each year is by companies already listed on the exchange, demonstrating the ability of London’s markets to support long-term and efficient capital raising. CEOs and CFOs value the ease and speed by which they’re often able to raise follow-on capital to support further growth and acquisitions. For example, on the LSE’s growth market, AIM, we have seen IPOs completed in 10.5 weeks, and follow-on fundraises completed in 2.5 weeks from board-decision to cash in the bank.
Successful APAC fintech companies already listed on the LSE
Several successful international FinTech companies have chosen to list on the LSE, including Kazakhstan’s Kaspi, which made history with its US$1 billion IPO on the LSE.
Following its launch on the LSE, Kaspi’s market capitalization reached approximately US$6.5 billion, making its IPO the largest at the time for a FinTech company in the EMEA region. Since listing in London, the company’s market capitalisation has almost doubled to £12.2B.
The success of companies such as Kaspi and others demonstrates the LSE’s appeal as a listing venue for international FinTech companies seeking to raise capital and expand their global reach.
FinTech remains a nascent sector ripe for consolidation. A public listing can be both an option for businesses to continue to remain independent, as well as attract new investors and acquisition opportunities through increasing its international profile.
Dispelling the myths around regulation
The perceived burden of regulatory compliance can also be a concern for companies considering a listing on the LSE. However, the LSE’s regulatory framework is designed to ensure transparency and investor protection while being flexible and proportionate to the needs of growth companies.
Furthermore, London is continuing to adapt following a series of reviews, which are now leading to real reform and market consultation, to ensure London maintains its position as a leading international venue for founders and their companies.
In addition, the LSE offers a range of support services to help companies navigate the regulatory landscape, including access to specialist advisers and a dedicated issuer services team.
London Stock Exchange Group: Supporting global fintech growth
As a global financial hub, London plays a vital social and economic role in the world’s financial system, and the LSE is at the forefront of this.
London is renowned for being open and supportive of global businesses, and the LSE is no exception. The LSE is committed to supporting global FinTech companies looking to raise capital and achieve their growth ambitions.
The exchange has a proven track record of successfully listing and supporting FinTech companies worldwide. To better understand how the London Stock Exchange could support your FinTech company’s growth, please contact Thomas Abbott, Head of SE Asia, Primary Markets, at the London Stock Exchange.
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