‘Existential crisis’: London Stock Exchange exodus tops £60bn after Darktrace deal

A top investment bank has sounded the alarm and called on government to act today after a take-private deal for Darktrace took the total value of exits from the London Stock Exchange to north of £60bn.

The £4.3bn take-private deal, struck with US private equity firm Thoma Bravo, marks the 20th takeover of a London-listed firm this year.

Deals worth more than £26bn have now been waved through by boards sine January, with firms picked off at an average of 36 per cent above their value on the market, underscoring the valuation gap that has plagued London’s historic bourse in recent years.

While Thoma Bravo walked away from talks to buy Darktrace in 2022, the latest bid comes in at a premium of 20 per cent on its current value on the London Stock Exchange.

Some £38bn worth of companies including gambling giant Flutter and travel firm Tui have also fled the London Stock Exchange overseas, taking the total value of exits to over £60bn, according to Peel Hunt. 

Darktrace has been regarded as one of the London market’s few great tech success stories and the merger will hammer home the crisis facing the London Stock Exchange.

Alongside a failed bid for miner Anglo American this week, the takeover will crystallise fears that London’s biggest firms are set to begin leaving the market. London’s biggest company Shell, has also mooted a switch to New York over its lagging valuation. Among the flurry of deals, 11 firms in the FTSE 350 have now come under offer.

“Darktrace should be a proper wake-up call to government. This is our leading tech company being acquired by US private equity,” ” said Charles Hall, head of research at investment bank Peel Hunt.

“The UK market has an existential crisis and needs urgent action to ensure it remains a leading listing venue.

“This includes removing stamp duty to restore competitiveness, pension reform to encourage home investment and a British ISA to stimulate retail investment in the UK.”

London’s junior AIM market has also been hit by a torrent of exits as firms lament the lack of liquidity and sluggish valuations.

The number of companies listed on London’s smallcap market cratered 30 per cent from 1,104 in 2015 to just 742 at the end of February.

The health of London’s stock market has shot up the political and regulatory agenda over the past two years as an exodus threatens to gut the market of companies. In a December regulatory package, the Financial Conduct Authority revealed plans to overhaul listing rules in a bid to boost its appeal.

Ahead of his budget in early March, the chancellor Jeremy Hunt also revealed plans to force pension funds to disclose their equity holdings to push more pension cash after a dramatic slide in recent years.

Just four per cent of the market is now held by domestic pension funds, down from 39 per cent at the turn of the millennium, according to data from think tank New Financial.