London needs more than hope to become an IPO hub

London International Shipping Week has shown the diversity of expertise in the city, but more fundamental change is needed if it is to become a leading centre of quoted companies as the UK heads towards Brexit

There could hardly have been a more vivid expression of valiant British hope over experience than the opening event of London International Shipping Week.

A selection of influential industry figures were on hand early Monday morning to ceremonially open trading on the London Stock Exchange.

The ringing of a bell to mark the now entirely digital stock market’s opening was greeted with a polite ripple of applause from those present.

The ballyhoo that traditionally greets the opening of the New York Stock Exchange it was not. But after all, this was London and things are done differently here.

All credit to the organisers and lobby group Maritime UK for finding a symbolic gesture to herald the start of an event that has in just a few years become a welcome focus and won the not inconsiderable backing of central government.

Such public support has been in short supply since the employment of Britons at sea and in shipyards collapsed in the 1960s and 1970s, sweeping away much of the political capital as voters lost touch with the industry.

The London Stock Exchange has been an important component in the growth of the City’s status as one the world’s leading financial centres over the past 30 years.

Yet while London’s heft in global finance has grown out of all recognition, the London Stock Exchange’s significance for shipping remains negligible, even after modest marketing campaigns in the past two years.

57b10541e90bd1ae18121eb1fd1ce3f2 The London Stock Exchange remains a market that has attracted little interest for shipowner IPOs  Photo: Scanpix

Admittedly, shipbrokers Clarksons and Braemar Shipping Services retain a high profile in their sector as listed companies. Several service suppliers and manufacturers are there, including Inmarsat, Global Ports and Rolls-Royce Holdings, which retains a sizeable marine division.

As for shipowners, it is slim pickings indeed. James Fisher — once labelled a small specialist owner — now bills itself as a service supplier, while cruise giant Carnival has a secondary listing but its shares trade in the travel and leisure sector.

A brief flurry of Greek owners listing in London came to an abrupt close last year after little more than a decade, when both Hellenic Carriers and Goldenport Holdings delisted after a lacklustre performance.

Both cited adverse market conditions as the main reason for their decision.

Investor interest and confidence in shipping is at the root of the problem. “Investors don’t follow the shipping industry in London as they do in New York… there’s just no appetite for it,” a player told us at the time.

Failure to win investor interest is not the only reason, however. Over the past 15 years, the London stock market has had great success attracting listings from major commodities companies from virtually every continent.

Parallels between the commodities and shipping sectors should have made it possible for investment bankers with vision to lure more owners to London.

Creation of corporate structures acceptable to owners and stimulation of interest from an adequate pool of investors are surely not insurmountable challenges when considered in the context of other market sectors.

The London Stock Exchange says it remains committed to encouraging maritime initial public offerings (IPOs), and has hinted there are currently two companies considering testing the market.

More than enthusiasm will be needed to make a significant mark.

Fundamentally, London investors need to be given confidence in the security of buying into shipping IPOs.

While severe volatility has hit commodity stocks over the past 10 years as raw material prices have gyrated, that has been relatively modest compared with the extreme fluctuations in shipping markets and shipping company shares.

Shipping remains — for the most part — a below investment grade sector. That remains a high hurdle for any potential IPO to overcome on any market, even New York or Oslo.

But in London, the lack of a deep pool of stock market experience in shipping makes that hurdle insurmountable to all but a very few.

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