The decision by Polish ecommerce group InPost to pick Amsterdam for its stock listing offers the latest sign that London risks losing its grip as a trading hub after Brexit.
UK chancellor Rishi Sunak has referred to the hard break from the EU in financial services that kicked in on January 1 as “Big Bang 2.0", a trigger for the City of London to flourish.
But bankers say Amsterdam is already showing potential to eat in to London's pre-eminence as a European capital markets centre. Trading in EU shares fled London for EU centres including the Dutch city on the first day outside the single market at the start of 2021. Wednesday's announcement by the Advent-backed parcel locker business suggests that initial public offerings may also gravitate towards where trading in European stocks is more lively.
“Looking at the options and the stock markets, Amsterdam looks very attractive because it seems that now that Euronext Amsterdam is becoming a kind of preferred tech companies listing stock exchange,” said Rafał Brzoska, InPost chief executive.
“Where in the past London was the default, we could see Amsterdam emerging as a new neutral listing place for IPOs, certainly for central and eastern European countries,” added Andreas Bernstorff, head of European equity capital markets at BNP Paribas, which advised on the InPost deal. “That is something that’s been accelerated by Brexit but also regulatory advantages in Amsterdam compared to London. We see that theme continuing.”
Euronext Amsterdam — part of a group of exchanges across the continent — handled just two IPOs last year, far behind London's tally of 36, including dual listings, Dealogic data show. But one of the Dutch deals, for coffee conglomerate JDE Peet’s, was the biggest European listing last year and at €2.3bn, the largest since 2018. The lockdown-era deal in May was the first €1bn-plus listing executed virtually, with the roadshow taking just three days, down from a typical 14. Around 90 per cent of investment in the deal came from outside the Netherlands.
That flexibility and international reach for a large deal has provided evidence that the Dutch financial centre can absorb transactions that might otherwise have headed for London.
René van Vlerken, head of listings at Euronext Amsterdam, said his focus is on attracting listings and liquidity to the whole Euronext network, which spans countries including France, Portugal and Belgium, rather than only to the Netherlands.
“I'm not so much concerned about where the centre of the [European] capital markets union will be. I don't care. I'm mostly concerned that the whole of Euronext can facilitate that,” he said.
London’s longstanding dominance of European finance is far from over even as it is being challenged, analysts have said.
“LSE remains the most international exchange for equity and bond issuers, traders and investors, and continues to be the financial centre of choice for issuance and trading within the pan-European timezone,” a spokesperson for the London Stock Exchange parent said. It is also urging the government to revamp listings rules to make the city a more attractive venue for fast-growing companies.
But for companies looking outside the UK, bankers think Amsterdam could have an edge over other European centres. “Choosing Paris or Frankfurt is more of a statement,” said one banker familiar with the InPost deal. Marginal differences in listing and governance rules in Europe tip in Amsterdam’s favour, he added.
Mr van Vlerken is pushing the case for Amsterdam “very loudly”, he said, noting that companies had started to look beyond London before Brexit was completed. “We talk to issuers from Israel and from Africa that in the past, if they were going to do a listing in Europe, they would automatically go to London. There was a tradition and a history there. But that is already shifting,” he said.
“More and more companies from outside Europe looking at a listing are seriously considering Euronext as an alternative to London.”
London's financial sector is effectively operating under a no-deal Brexit after the UK and EU failed to reach a deal on so-called equivalence, or mutual recognition on standards and regulation, before the UK dropped out of the single market and customs union at the end of 2020. That outcome had been anticipated by financial institutions on both sides, so it has not generated a large amount of disruption. It has, however, sucked EU share trading away from London overnight, in a reminder of how rapidly established trading norms can change.
For shares in dual-listed Just Eat, for instance, around 66 per cent of regulated trading headed to Amsterdam last year. That figure has already climbed above 80 per cent. That shift in liquidity helps to draw in new listings, said Mr van Vlerken.
Also on Wednesday, Just Eat said it had halted plans to delist from the Netherlands and focus on the UK. The company is reviewing all its listings as US rules demand the company is also traded on an American exchange following its $7.3bn purchase of Grubhub last year. Overshadowing its decision is a review by index compiler FTSE Russell, which may mean Just Eat is removed from the UK’s FTSE 100.
Mr van Vlerken believes any boost to the Netherlands owing to a lack of equivalence will prove fleeting. “Advisers and issuers are asking me about the lack of equivalence but I prefer to rely on our own strengths. The mutual benefits are too great for London to cut itself loose for the long term. In the end there will be some kind of resolution.”
The UK, however, has already shown it is willing to carve out its own path in financial services, splitting away from EU practices and rules. It is planning to bring trading in Swiss stocks back to London, in a break with an EU ban that prevailed before January’s full break with the bloc.
Additional reporting by Tim Bradshaw