New LinkedIn post from Matt16 Nov 2023 18:42
“Apparently, the movie Groundhog Day is one of the most watched movies at Christmas.
But there’s a real-life version people can watch every day in London 😂
Today’s episode involves British brand, Hotel Chocolat, which IPO’d in May 2016 at 148p a share. At the time, it had sales of c£85m and £10m EBITDA.
Since then, Hotel Chocolat’s Sales and Profits have more than doubled to £205m and £24m - a true British success story.
Despite this stunning performance, the shares recently fell to all-time lows of 100p.
6 years of hard work, probably c£50m of LSE related costs and fees, and it's valued at a third less than at IPO 🙄
As recent as 5 years ago, investors would ask for a 30% discount when valuing private companies versus LSE peers. The argument was that investors needed a discount as they can't easily sell shares in private companies, and so they're higher risk.
But times have changed. Today, it’s the norm for investors to want huge discounts to invest in UK listed stocks versus UK private companies, or overseas public markets.
Mars has agreed to pay 375p a share to take Hotel Chocolat off the LSE - a whopping +270% premium to the 100p share price just a few weeks ago.
Hotel Chocolat isn't small – Mars is paying £514m to take it from British into US ownership. In fact, the UK's largest companies like bp and Shell are valued c50% less than their US listed competitors like ExxonMobil.
The demise of the LSE has led to over 100 companies having left London versus this time last year. Another 19 companies, each worth over £100m, have also confirmed plans to exit, with almost nobody planning to join.
LSE data shows share volumes traded in London are down c40% YTD in 2023, and 50% in Q3, as investors swerve the UK for safer shores.
Where are those safer shores?
Wait for it….Romania, Turkey and pretty much anywhere except London.
Not that long ago, the LSE was where companies would raise investment for ambitious growth plans. Those days are gone. London ranks outside the top 12 destination’s for companies raising funds via IPOs so far in 2023 (see pic).
There’s no data to say what position London holds, but the UK raised less than half the funds of 12th placed Romania....
Why? The CEO of Muddy Waters, a notorious US Hedge Fund, gives some colour. He recently suggested that short sellers, like him, will always attack tech companies on the LSE - because they should be listed in the US, not the UK.
If founders list tech companies in London, he simply says they're “not that bright”.
Muddy Waters also ridiculed proposals to force UK pension funds to invest in LSE companies to save London: “There are going to be so many charlatans who come out of the woodwork and so much money lost”.
The demise of the LSE won't be fixed by forcing regular people to hand over their pensions. Surely, first we need to address the real factors causing Hotel Chocolat & hundreds of others to flee London.
#go
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