London Stock Exchange: A Gateway to Global Markets for APAC Fintechs
In recent years, the Asia-Pacific (APAC) region has been at the forefront of the FinTech revolution, with many innovative companies disrupting traditional financial services.
For APAC FinTech entrepreneurs and their investors, the decision to raise capital through an initial public offering (IPO) is a significant milestone in their journey towards growth and expansion.
The London Stock Exchange (LSE) remains a popular option for international companies looking to access global capital markets. About 40 percent of the companies listed in London are international.
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A listing on the LSE can be an option for growth companies looking to raise capital and achieve their long-term strategic goals, benefiting from access to a large pool of international investors. However, it is important to address several unfounded myths surrounding the costs and regulatory requirements associated with a London listing.
Despite this growing trend, there are still some common misconceptions about the costs and regulatory requirements associated with a London listing. This has led some companies to overlook the LSE as a viable option for fundraising and expansion, potentially missing out on the benefits of accessing a large pool of international investors and a more established capital market.
Affordable listing on the London Stock Exchange
A common misconception is that a listing on the LSE is an expensive endeavor that only large companies can afford, but this view is not accurate. Although there are costs associated with listing on the LSE, including initiation fees and ongoing compliance costs, they are generally lower than for other major financial centres. Furthermore, the LSE offers a range of markets tailored to different types and sizes of companies, including AIM, specifically designed for smaller, growth-oriented companies.
This provides a more affordable option for growth companies looking to raise capital through an IPO while accessing the benefits of a London IPO. This is evidenced in companies such as founder-led mobile payments company Fonix Mobile, which raised £45m in 2020 at a market capitalization of £90m and is now valued at around £200m.
Valuations are not market dependent
Despite the widespread belief that a company’s valuation will be lower on the London market, the truth is that its valuation will primarily be determined by its underlying fundamentals, such as revenue, earnings and growth prospects. For example, Wise listed on the LSE in July 2021 via an £8.75bn direct listing, and its shares trade at a premium to their US counterparts, mainly due to growth and margins.
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As one of the world’s oldest financial centres, London has a wealth of analysts and investors who have backed companies from sectors such as financial services through multiple fundraising cycles. Investors have also backed payments companies such as Datacash, Worldpay, Paysafe, Safecharge and Earthport and continue to support a new wave of FinTech entries including Wise, LendInvest and PensionBee.
Access to permanent capital for growth
A critical benefit of a public listing is that it gives companies access to permanent capital to support their growth ambitions. Unlike private equity or venture capital financing, which typically has a limited lifespan, a public listing provides a company with a long-term source of capital that does not need to be repaid.
This is particularly important for FinTech companies, which often require significant investments in technology and infrastructure to remain competitive. By listing on the LSE, companies can access a deep pool of institutional and private investors willing to invest in growth companies.
The majority of transactions and capital raised in London each year are by companies already listed, demonstrating the London markets’ ability to support long-term and efficient capital raising. CEOs and CFOs value the ease and speed with which they are often able to raise follow-on capital to support further growth and acquisitions. For example, on the LSE’s growth market, AIM, we have seen IPOs completed in 10.5 weeks, and follow-on fundraising completed in 2.5 weeks from board decision to cash in the bank.
Successful APAC fintech companies already listed on the LSE
Several successful international FinTech companies have chosen to list on the LSE, including Kazakhstan’s Kaspi, which made history with its USD 1 billion IPO on the LSE.
Following its launch on the LSE, Kaspi’s market capitalization reached approximately $6.5 billion, making the IPO the largest at that time for a FinTech company in the EMEA region. Since its IPO in London, the company’s market value has almost doubled to £12.2 billion.
The success of companies such as Kaspi and others demonstrates the LSE’s appeal as a listing venue for international FinTech companies looking to raise capital and expand their global reach.
FinTech remains an emerging sector ripe for consolidation. A public listing can both be an option for companies to continue to remain independent, as well as attract new investors and acquisition opportunities by increasing their international profile.
Dispelling the myths surrounding regulation
The perceived burden of complying with regulations may also be a concern for companies considering a listing on the LSE. However, the LSE’s regulatory framework is designed to ensure transparency and investor protection while being flexible and responsive to the needs of growth companies.
Furthermore, London continues to adapt following a series of reviews, now leading to real reform and market consultation, to ensure London maintains its position as a leading international arena for founders and their companies.
In addition, LSE offers a range of support services to help companies navigate the regulatory landscape, including access to specialist advisers and a dedicated issuer services team.
London Stock Exchange Group: Supporting global fintech growth
As a global financial hub, London plays an important social and economic role in the world’s financial system, and the LSE is at the forefront of this.
London is known for being open and supportive of global businesses, and the LSE is no exception. LSE is committed to supporting global FinTech companies looking to raise capital and achieve their growth ambitions.
The exchange has a proven track record of successfully listing and supporting FinTech companies worldwide. To better understand how London Stock Exchange can support your FinTech company’s growth, please contact Thomas Abbott, Head of SE Asia, Primary Markets, at the London Stock Exchange.
