One reaction to AstraZeneca’s listing rejig is relief. The big worry was that the second largest company on the London Stock Exchange would skip off entirely to New York, keeping only a secondary listing in the UK as a face-saver for the government. That, fortunately, is not the plan.
Instead, the pharma giant is upgrading its listing on the New York Stock Exchange to give it equal status with the ones in London and Stockholm. AstraZeneca will retain its UK headquarters and its presence in the FTSE 100 index. So, if one is determined to don rose-tinted spectacles, it is possible to pretend there’s nothing fresh for London’s capital markets to fret about.
The company says its new “harmonised” listing structure will merely make it easier for those US funds that aren’t allowed to own American depositary receipts (ADRs, a wrapper provided by a handful of banks for US investors) to get their hands on full-fat AstraZeneca stock. “A global listing for global investors in a global company,” as the cheerful corporate spin put it.
But this definitely is not a moment to accentuate the positive. The problem is what happens next. It is not hard to imagine AstraZeneca’s arguments being adopted by other large FTSE companies that could equally call themselves “global” on account of generating more of their revenues in the US. Just scroll down the list: Shell, BP, Unilever, Diageo, Relx and so on.
None have exactly the same immediate incentive to dress up in stars and stripes while President Trump is on the warpath over US medicine prices and pharma tariffs (possibly a factor in the timing of AstraZeneca’s announcement). But all could take the view that ADRs are a hassle and an imperfect substitute for actual shares traded in New York.
And, if AstraZeneca’s move were to mark the start of a mid-Atlantic drift – big FTSE 100 companies staying in the index but choosing an equal New York listing – the process inevitably wouldn’t stop there. Share-trading might gravitate to New York because the investment pool there is simply bigger. The other important technicality is that the US, unlike the UK, does not charge a ludicrous stamp duty of 0.5% on share transactions. On that score, a note in AstraZeneca’s circular on Monday revealed that even UK buyers of its shares won’t pay the tax because settlement of trades will happen under the US system. Such a setup would seem to drive a coach and horse through the UK’s stamp duty regime.
Welcome to globalisation in action. It may be in retreat in other commercial areas, but it is alive and kicking in capital markets. The traffic won’t be entirely one-way – optimists can point to a £13bn US datacentre company, Fermi, that is joining London’s main market this week alongside its primary US listing – but globalisation comes with a gravitational pull to the US.
Rachel Reeves will have weightier matters on her mind currently, but she needs to see the risks here. Stamp duty is a terrible advert for London, as argued here many times, and needs to be abolished. If the chancellor needs to raise £3bn-£4bn from financial transactions, she should find a different design. After that, the job is about stimulating a deeper pool of domestic buyers for UK equities from both the pension fund and retail population.
That is easier said than done, but it would help if Reeves was less obsessed with prodding pension funds to increase their allocations to UK private assets (think infrastructure and private equity funds) and more concerned with boosting the appeal of transparent public markets, which is where the real crisis lies. AstraZeneca’s move to “harmonise” its listing is not harmonious for London.
