Within less than two weeks of announcing the move, the largest natural soda ash producer in the world has abandoned plans to sell shares on the London Stock Exchange.
We Soda was valued at more than £6 billion and reportedly wanted to raise £600 million through a floatation.
We Soda, on the other hand, stated that investors in the UK “remain extremely cautious” and were unable to arrive at a fair valuation.
The UK’s reputation as a financial hub has been damaged by We Soda’s reversal.
Alasdair Warren, the company’s CEO, stated just two weeks ago that “London still works” and that the London market would “well understand our business.”
Prior to that, Arm Holdings, a Cambridge-based manufacturer of microchips, chose the United States over the United Kingdom despite government pressure to list its shares in London.
Building materials giant CRH announced earlier this year that it would move its main share listing from London to New York.
We Soda’s floatation would have been the largest so far this year in the United Kingdom, and the company would have joined the FTSE 100 index of blue-chip companies.
However, Mr. Warren stated this week: We were unable to arrive at a valuation that we believe accurately reflects our distinctive financial and operational characteristics due to the extreme caution of London’s investors.
He stated on the BBC’s Today program that the valuation was a “broader European issue” rather than “just a UK issue.”
Mr. Warren stated that during initial public offerings (IPOs), businesses typically accept a discount on the price of shares.
He stated, “Typically it’s 15 to 25%.” You need to decide whether or not to launch when that discount effectively doubles.
“The valuation just wasn’t at the level we thought would make any sense for our company,” the company stated.
Mr. Warren remained supportive of London as an option for selling the company’s shares. However, he added, “We Soda would look to grow in North America.” Therefore, that might be a viable alternative in the event that we rethink returning to the market.
He stated: It will all depend on the initial public offering market conditions in Europe, the state of our business, and our position in relation to the balance between Europe and North America at the time.
WE Soda, the world’s largest producer of natural soda ash, has scrapped plans to list on the London Stock Exchange (LSE). The company cited “extreme investor caution” as the reason for pulling back.
WE Soda had planned to raise £800 million ($1.03 billion) in an initial public offering (IPO) on the LSE. The company was expected to be valued at up to $8.5 billion.
The decision by WE Soda to scrap its IPO is a blow to London’s financial sector. The city has been struggling to attract IPOs in recent years, as investors have become more cautious about investing in new companies.
In 2022, there were only 10 IPOs on the LSE, raising a total of £2.4 billion. This was the lowest number of IPOs in London since 2016.
The decision by WE Soda to scrap its IPO is likely to further dampen investor sentiment towards London. It could also make it more difficult for other companies to raise money through IPOs in the city.
The LSE has been trying to attract more IPOs by making it easier for companies to list on the exchange. However, the decision by WE Soda to scrap its IPO suggests that the LSE still has a long way to go to convince investors to list their companies in London.
The following are some of the reasons why WE Soda may have decided to scrap its IPO:
- The global economic outlook is uncertain, which has made investors more cautious about investing in new companies.
- The war in Ukraine has also created uncertainty in the global markets.
- The LSE is facing competition from other exchanges, such as the Nasdaq and the New York Stock Exchange.
The decision by WE Soda to scrap its IPO is a setback for London’s financial sector. The city will need to do more to attract IPOs if it wants to remain a leading financial center.
Does it matter where a business chooses to list?
Shares that are listed on an exchange in the UK, the United States, or one of the European markets can be purchased by pension funds or individual investors.
However, a listing in the UK generates a significant amount of ancillary business for the UK financial services industry, which still accounts for more than 10% of the UK economy and contributes more than 10% of all taxes paid here.
The fees that UK listings bring in support businesses like accountants, lawyers, and financial PR firms.
The departure has not slipped through the cracks by the public authority. It has been working feverishly to make the UK a more inviting location for businesses to set up shop.
We Soda is owned by Ciner Group, a Turkish industrial conglomerate controlled by Turgey Ciner, a billionaire. However, the company’s headquarters are in London, and Europe is its largest market.
The company makes soda ash, which is used to make glass, solar panels, batteries for electric vehicles, and washing powder detergents.
The amount raised through share floatations on the London Stock Exchange decreased by 90% last year, according to consulting firm EY.