Hello everybody, my name is Maurice Button, I'm the CEO of City & Financial Global and welcome to the latest edition of C&F Talks in which we interview speakers from our upcoming events. Today it's my pleasure to be speaking to Mark Austin who's a Partner at Latham & Watkins who's going to be speaking at the International Capital Markets Leaders Summit which is taking place as part of City Week at the Guildhall on the 20th of May. Mark, welcome.

Thank you Maurice, thank you for having me.

Great to have you here with us. Let's turn to the first question.

The figures for new listings in London make for somewhat depressing reading, £12 billion was raised on the market in 2021, £338 million in 2022 and so far, this year only £18.5 million at the time we did this research has been raised. Why don't companies want to list in London?

Well, you might expect me to say this but I don't actually agree that they don't. I mean I think part of the reason is a cyclical one, I mean capital markets across the globe whether it's London or anywhere else have been closed or effectively closed for some time during those years, due to a combination of things that we all know about, you know high interest rates, inflation, factors that haven't been conducive to public capital markets but you are starting to see that shift now.

And I do think that in London in particular the mood music is really starting to change, and we've seen some European IPOs, we've seen some US IPOs recently, the Middle East is starting to fire again as well and in London, in terms of the activity on the ground, particularly since the turn of this year I would say, the number of inquiries about people thinking about you know coming to London, thinking about this thing in London has really picked up. So I think that the figures obviously you know if you look at them in black and white are not that encouraging, but actually they don't tell the full picture.

Okay so watch this space, there's more coming in the pipeline.

Of course the performance of the market itself is one of the perceived negatives, over the last year the FTSE has gone up by just 7% while the Dow Jones is up by 54% over the same period. What are the factors behind this and is one of those the fact that we have fewer high growth listed technology companies and also what's been the impact of Brexit?

So I mean I think that is right, I do think that's right, I mean we have a different mix of companies for example to New York in terms of sectors, we have more you know traditional dividend yielding stocks, banks, financial services, mines etc and we all know that the top seven stocks in the states have all been going through the roof in recent year in terms of the valuations and that has driven. That's largely driven their market, if you strip them out actually market performance hasn't been that different.

I would actually note though that since the turn of the year you know the European market performance has actually been pretty commensurate with the States, I mean we've started that you get emails in, I'm sure you do too, daily emails from market participants and actually often these days in the mornings you find that actually European markets have performed just as well if not better than US markets, I think this is the turn of the year I would say, so I think there are those factors are there.

In terms of Brexit, has that affected performance? I don't, I personally don't really think so actually, I think that Brexit was clearly a perception, a negative perception I think for some people in terms of how they looked at the EU as a national centre and a listing destination but I don't personally think that that has really impacted our markets and actually the positive news is that what we've been doing in the last three and a half, four years is progressively and systematically taking the friction points out of our listing regime and out of our regulatory regime more widely to mean that actually they are, to use that famous phrase now it seems, about to be match fit again and I think that's the narrative that we need to be focusing on.

Maurice

Okay, I mean that I suppose you're attracting companies as one thing but losing companies is obviously another problem and it's worrying that some large companies such as Flutter, the owner of Paddy Power, are said to be considering moving their listings. What can be done to communicate with them and to discourage this trend do you think?

Well, I think the first thing we need to say about that is that there will, for some companies, moving their listing will be the right answer. Now I'm one of the firmest advocates of the London markets but you know there are some companies in particular sectors or a particular size for whom actually being on the New York markets might be the right answer.

However, there are a lot of companies for whom it will not be the right answer. You know this sort of lazy dialogue that we only need one global capital market and that needs to be New York and that it's the right answer for every company as the panacea cures all else is not true. And actually we've been engaged in trying to write that narrative in recent times, because and it's actually been informing most of the reform discussion that we've been engaged in for the last three and a half, four years because what we've been seeking to do is not try to be New York. New York is a bigger market than London, it probably always will be.

What we've been trying to do is take the friction points out of us, out of our markets in London using a referendum as an opportunity to do that because it meant that we needed to focus on those points so that for those companies for whom New York is not the right answer, of which there will be a lot and I'm thinking particularly of companies that are you know 10 billion or more in terms of market cap, companies who are what are called foreign private issuers so they're not domestic US issuers.

For those companies in many cases New York will not be the right answer, and what we're engaged in is London is making sure that London is again the obvious alternative and that the friction points that have built up in our system in London in the last 10 or 20 years we've now focused on because of the referendum and because we needed to update them and made ourselves match fit again so that for those companies London is the right answer.

Maurice

So targeting it as a particular size might be one of the solutions but what about the number of take privates that we've seen you know since 2014 137 companies worth 117 billion pounds have been taken off the stock market by private buyers. Do you actually think that there's a level playing field between the public and private markets and if not, what might be done to remedy this?

It's a very good question. I mean, I think that is that is one of the questions the wider reform questions that's vexing or is sort of becoming front of mind now for the people across the globe but it's not just a London issue it's as you say a general public and private markets issue.

I think we all recognize that private markets are here to stay they for sure they are and we need to accept that and for a lot of companies being in a private domain will be the right answer. Actually the intersection between public and private markets is in many cases where the action is right now, that intersection then you see it from you see private equity sponsors talking about how they want to do auctions amongst their LPs for states and their you know companies you have at the moment.

We have the consultation going on in the UK around our new potentially coming online in Q4 the world's first regulated crossover public private market, Pisces, is where is where that public private crossover is where the action is and it is but it is a point for the public markets to recognize that the delta the disjunct between public and private markets has become so accentuated in recent years that we do need to think about how we can close it.

And it applies in a number of areas and the obvious ones are the liability profile of, you know, directors of companies on the black markets versus private, the remuneration flexibility that you have in private versus public, actually the long-term ism versus short-term-ism of public versus private market yeah private and VCs have grown up they take long-term views often longer-term views than public market investors these days.

I think they're all things sort of systemic points that we are starting to think about now and how we how we close that gap because it is a real point but I think, no I think having said that though that nobody who works in private markets and or not many people think that there isn't a place for public markets. You know, we know we see various bankers that come out talking about the massive backlog of private companies that need to be exited onto the public markets now and you know continuation funds and secondaries can only go on so long, I think everybody recognizes that, and those exits are going to have to happen.

And so we need public markets that are not overly frictional, that are not overly burdensome on their management and their shareholders and I do think actually that's going to be one of the reform discussions that we're going to see increasingly come to the fore in in the coming two or three years, how do you find that.

Yeah and I'm sure you're right on that because there are huge numbers of companies as you say that need to be exited from. And of course they're of the size that you're talking about, you know, where London is the perfect market for them.

Now finally, just because time's beginning to press now across the city and government numerous initiatives have been launched to address the current malaise including your markets review and attempts to get pension funds and retail investors to invest in UK equities. Do you think that collectively you talk about removing the friction do you think that collectively all of these would be sufficient to remove that friction?

I'm an eternal optimist and I do believe so and I don't actually think I'm naive in saying that. I mean, I think you know when you when you look in the day job and things on the ground as I said at the start of our conversation I do you do get the real sense that things are changing. That people are looking afresh at the London market that they are realizing what we've done across listing regime, reform, remuneration and governance reform, index inclusion reform that we're working on at the moment, capital driving capital into UK markets there's more to do there for sure we know that but we've had no pretty dice.

As you say the Mansion House compact there's various initiatives that are starting to come online. But there's more to do and then I think where we're getting to now, is that what we need to do about the UK markets is make people realize what we've done. Pull it all together into what I call the UK elevator pitch so that people understand how it all fits together, why the UK markets are about to match fit again, and importantly and this is a particularly British point talk positively about ourselves and about what we've done and accentuate positive rather than the negative. We can sometimes be as Brits a little bit Eeyore-ish about success and about our achievements and I think when you do talk positively to people about all this reform they really listen and I do think that's what is changing the conversation on the ground and I expect that to continue.

Excellent, on that very optimistic, hopefully realistic but optimistic tone but I think we better draw the interview to a close in the interest of time. For our viewers we very much hope that you'll be able to join us at the International Capital Markets Leaders Summit taking place at Guildhall part of City Week, the event is part of City Week on the 20th of May where you'll hear much more discussion about these and many other related points. Mark, thank you so much for sharing those thoughts.

Thank you for having me, Maurice.