Struggling to Sway New IPOs: London Stock Exchange Group's Equity Woes
London Stock Exchange Group's Equity Division Struggles to Maintain Significance
The London Stock Exchange Group (LSEG) is grappling with a shrinking importance of its equity business, dumping cold water on aspiring Initial Public Offerings (IPOs) in the UK market.
In the first quarter of 2025, LSEG's market arm showed promising growth, but not from its cherished London Stock Exchange. The firm unveiled this statistical oddity in a trading update – its stock exchange equity business shrinking as a proportion of overall income, generating only £62 million during the quarter. Even though this figure showed a slight increase from the £60 million of the previous year, it paled in comparison to the 8% revenue jump across the entire group, and a whopping 13.3% surge in its markets arm.
"Secondary markets experienced significant volume-driven growth, though this was only partially compensated by subdued primary revenue growth," the group commented.
IPO Drought Courts Concerns
The London Stock Exchange has battled an ongoing dearth of new floats since recent years, sliding down to 35th in global IPO rankings last year. The dismal first quarter of 2025 witnessed only four IPOs on the stock exchange, while 15 acquisition bids took center stage.
Meanwhile, LSEG's bond and derivative market arm thrived, up 24% to £394 million, and over-the-counter derivatives business sales surged from £138 million to £161 million.
"Varied yet robust gains marked our markets segment amid market turbulence and economic uncertainty, with this volatility persisting into April, reflecting the constantly shifting financial market outlook," proclaimed London Stock Exchange Group CEO David Schwimmer.
The Clamor for Change among Investors
A faction of LSEG investors has been vocal about its concerns, advocating for the group to sell its stock exchange business, and rebranding with a focus on data and technology. This advocacy stems from LSEG's purchase of data firm Refinitiv in 2021, and a 2022 10-year partnership with Microsoft, where the tech giant acquired a 4% stake in the firm.
Revenue from LSEG's data and analytics division surpassed the £1 billion mark for the first time in 2025. This arm now accounts for almost half of the company's total revenue, having grown 4.4% since the first quarter of 2024.
"We remain committed to driving the strategic repositioning of our business, by fostering a robust product pipeline, investing in engineering talent, and capitalizing on the Microsoft partnership," Schwimmer added.
Pushing Ahead: Repurchasing Shares and Market Resurgence
LSEG is steadfast on its share buyback plan announced in February, revealing that £245 million out of the £500 million set aside for share repurchases has already been utilized. The group's stock price has climbed more than 30% over the past year.
As market conditions stabilize and confidence returns, experts anticipate a resurgence in IPO activity spurred by mergers, demergers, and international listings. Until that time, the LSEG's equity business may have to endure stormy weather compared to its flourishing counterparts.
In Depth: Problematic IPO Markets
- Economic Instability: The UK stock market is influenced by macroeconomic and geopolitical volatility, which dissuades firms from IPOs because of uncertainty in anticipated market conditions and investor appetite[1].
- US Trade Disputes and Volatility: Recent US trade tariff announcements have amplified market volatility to COVID-19 pandemic levels, discouraging companies from considering IPOs due to the complications of listing timing and valuations[1][2].
- Favorable Conditions Scarcity: Despite positive returns on the FTSE 100, the broader market environment is not conducive for IPOs, as they typically require stable conditions to materialize[1].
- The London Stock Exchange Group (LSEG) is experiencing a decline in the importance of its equity business, which is affecting the attraction of Initial Public Offerings (IPOs) in the UK market.
- In the first quarter of 2025, LSEG's stock exchange equity business shrank as a proportion of overall income, generating only £62 million during the quarter, despite a slight increase from the previous year.
- The LSEG's bond and derivative market arm, on the other hand, showed robust growth, with over-the-counter derivatives business sales surging from £138 million to £161 million.
- The dearth of new floats on the London Stock Exchange has been ongoing, causing it to slide down to 35th in global IPO rankings last year.
- A faction of LSEG investors is advocating for the group to sell its stock exchange business and rebrand with a focus on data and technology, citing the successful purchase of data firm Refinitiv in 2021 and a 2022 10-year partnership with Microsoft.
- Experts anticipate a resurgence in IPO activity spurred by mergers, demergers, and international listings, but until then, the LSEG's equity business may face continued challenges compared to its technologically and data-focused counterparts.
