Record amount raised in London this year as foreigners rush to float

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The Independent Online

More money is being raised from flotations in London than ever before, as companies flock to take advantage of more relaxed listing rules, City expertise, cheaper costs of selling their shares and the glut of funds looking for a home.

Figures from the London Stock Exchange released yesterday showed that £17.8bn has been raised through initial public offerings on its markets so far this year, more than the £17.1bn raised during the whole of 2005.

Retailers, insurance companies, oil producers, telecommunications groups and gaming firms are among those to raise sizeable amounts of capital by listing in London in 2006.

Last month alone, the LSE attracted 25 flotations, raising a total of £7.4bn. Of the eight companies to list shares on the main market, three were international, raising between them the most in a single month since the heady days of the boom of 2000.

Standard Life successfully completed the market's largest float since Dimension Data's £6bn listing in 2000. According to figures from the LSE, the Edinburgh-based life assurer raised more than £2.2bn gross of fees to shore up its capital position and fund future growth. Days later, the controversial flotation by Rosneft in London and Moscow was bigger still. The Russian oil giant raised almost £3.6bn over here.

The 17 IPOs on the Alternative Investment Market, four of which were foreign companies, raised £563m in total.

Tracey Pierce, head of global business development at the LSE, said: "The strong capital-raising performance on our markets this year illustrates London's continued success in attracting companies from both the UK and overseas. It offers issuers a combination of the world's largest pool of investment funds, highly regarded standards of regulation and an internationally focused advisory community. The choice of either the main market or AIM also give companies the flexibility to choose the market that is right for them."

London is outpacing New York as a destination for stock market flotations as companies that may have in the past looked to Wall Street when raising cash continue to eschew tough, post-Enron corporate rules there.

Controversial Sarbanes-Oxley legislation - rushed through in 2002 in the wake of a wave of US corporate scandals - stipulates onerous accounting standards aimed at ensuring that public companies more fully disclose their financial positions.

The New York Stock Exchange, which has agreed to merge with Euronext, the operator of the Paris, Amsterdam, Lisbon and Brussels exchanges and London's Liffe derivatives exchange, has blamed its loss of new listings on increased regulation.

Figures published by the LSE at its annual meeting showed a tale of two cities, when competing for international listings. London attracted 50 international companies from 15 countries to the main market and AIM over the first six months of this year. Between them, they raised £4.5bn.

In contrast, during the first five months of the year only 15 foreign companies listed on the NYSE and Nasdaq exchanges combined.

This month, the LSE trumpeted the first IPO on its main market by an American company, Napo Pharmaceuticals. The announcement came on the very day that Hank Paulson, the former head of the investment bank Goldman Sachs and now the US Treasury Secretary, used his first public speech to urge a lighter regulatory touch for American corporations.

A study commissioned by the LSE and the City of London revealed earlier this year that London was the cheapest city in Europe and North America in which a company could list. That study by the consultants Oxera found London to have lower cost of capital at both flotation and beyond.

At between 3 and 4 per cent, underwriting fees in London were markedly cheaper than the 6 to 7 per cent typically levied in North America for listing on either the NYSE or Nasdaq. Andrew Mitchell, an exchanges analyst at Fox-Pitt Kelton, said: "The more stringent US Sarbanes-Oxley regulations appear to be acting as a deterrent for companies that may otherwise be considering a New York listing. London enjoys a good reputation for international listings, and does not appear to be as expensive as New York to comply with legislation."

Smaller companies in particular are said by experts to have favoured London over New York. There can be little doubt that AIM has become the No 1 destination for smaller American firms searching for a stock market listing.

There are now 29 US companies quoted on London's junior market. Of these, 19 were admitted last year when they raised more than £1bn of new money.

Dru Edmonstone, head of corporate broking at Seymour Pierce, said: "The bottom line is that they can raise money through a wider variety of sources than perhaps they can in other countries, and it's cheaper for them to do so."

The pipeline of smaller companies looking to come to AIM in the past three months of the year is as strong as ever and their quality is increasing, Mr Edmonstone added.

The flow of listings to London has been further encouraged by the decision by Nasdaq to impose a minimum market capitalisation and share price on companies. American firms valued at less than £200m have been left with nowhere to go but overseas.

Further attractions of London are its concentration of financial expertise - of investment bankers, lawyers and accountants - and the size of its investment community.

While the LSE's chief executive Clara Furse uses London's success as a key plank of her defence of its independence, that success may yet prove its undoing.

Nasdaq's response to the transatlantic migration of listing business has been to make a grab for London. Its initial £2.4bn approach for the LSE was rebuffed. It has since built a 25.1 per cent stake, which in effect delivers it a veto on any rival bidder.

Under Takeover Panel rules, Nasdaq is unable to take another tilt at the LSE until October. Most experts expect it to do so. Should the LSE succumb second time around, many within the City fear an infection by tougher US listing rules could put the brakes on London's runaway success.