US Listing5 Nov 2025 12:44
Just out of interest I asked AI about a US listing people may find the answer interesting and give you something else to think about other than Dube.
The share price performance (SP) of a UK company after listing on a US market is highly variable, often underperforming initial expectations in the medium term, though the immediate reaction can be positive on the news of a potential move.
Key factors and likely scenarios:
Initial positive market sentiment: The announcement of a potential US listing often leads to an initial boost in the UK share price, as investors anticipate benefits such as higher valuations and greater access to capital.
Mixed post-listing performance: Data suggests a challenging track record for most UK companies post-listing in the US.
Many have seen their share prices fall significantly after the initial public offering (IPO) or move.
One analysis found that 70% of European companies that moved to the US in the past decade were trading below their listing price, and less than a fifth had beaten the S&P 500 performance.
Only a small number of companies, such as Arm and Ferguson, have been successful in the long term, with some (like Cazoo and Vertical Aerospace) experiencing sharp falls.
Arbitrage opportunities: In a dual-listing scenario, the share prices on the two exchanges should be roughly the same after accounting for exchange rates and transaction costs due to arbitrage activity. The price on the UK exchange might rise as specialist investors move in to take advantage of the upcoming US listing.
US index inclusion: A key driver for share price performance in the US is inclusion in major indices like the S&P 500, which leads to demand from passive funds. However, inclusion requires meeting strict criteria (e.g., substantial US revenues/assets, minimum market cap), which not all companies immediately achieve, potentially leading to underperformance.
Sector-specific appeal: Companies in specific high-growth sectors like technology and biotechnology are often perceived to receive higher valuations from the US investor community, which may be more familiar with their business models.
Increased costs and scrutiny: The higher costs associated with US listings (e.g., higher underwriting fees, ongoing regulatory compliance under the Sarbanes-Oxley Act, higher litigation risk) can put pressure on a company's bottom line and require significant managerial attention, potentially dampening performance.
In summary, while the potential for higher valuations and a deeper capital pool exists in the US market, historical data indicates that many UK companies face challenges, and a US listing does not guarantee a positive share price movement. Success often depends on the company's specific circumstances, existing US presence, and ability to meet the demands of the US market.
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