London stock market could weather its biggest blow yet if AstraZeneca exits

CNBC

a day ago

Pressure is piling on London's stock exchange, with reports that British pharma giant AstraZeneca may move its listing to the U.S. delivering yet another blow this week.
CEO Pascal Soriot is considering moving the company's stock listing from London to the U.S., British newspaper The Times reported on Tuesday afternoon, citing anonymous sources. Soriot's frustrations with the U.K.'s regulatory environment — particularly rules around new medicine approvals and drug pricing systems — are said to be driving the move.
AstraZeneca declined to comment on the Times report.
The company's exit from the U.K. market would spark a major index re-weighting, given AstraZeneca is the most valuable business listed on London's FTSE 100. AstraZeneca's market cap was £161.2 billion ($221.1 billion) as of Tuesday's closing price, according to LSEG data.
AstraZeneca's potential transatlantic move would add to concerns around London's weakening status as a global financial hub. A number of companies have delisted from the London market or reconsidered plans to float shares in the city over the past year.
Toni Meadows, head of investment at London's BRI Wealth Management, labeled AstraZeneca's rumored listing considerations as "disappointing" for the U.K. equity market — but he conceded that "it is not surprising" given that it would form the latest development in a wider established trend.
Earlier this year, reports emerged that Chinese fast fashion giant Shein was looking to list in Hong Kong instead of London, when it goes public. Last week, news agency Reuters reported that the company was planning to file confidentially for a Hong Kong IPO.
Metals investor Cobalt Holdings, meanwhile, confirmed to CNBC last month that it had scrapped plans for a London IPO, while British fintech giant Wise announced in June that it was moving its primary listing from London to New York.
Kristo Kaarmann, Wise's CEO and co-founder, said in a statement at the time that the move would help raise awareness of the company in the U.S., while giving the firm better access to "the world's deepest and most liquid capital market."
Companies listed in London have historically had much lower valuations than their Wall Street counterparts. Research from British investment manager Rathbones last year showed that the forward price-to-earnings ratio for U.K. stocks was 32% lower than those listed in the U.S. on a like-for-like basis.
On the flipside, the Financial Times reported last week that Norwegian software giant Visma had chosen London for its upcoming debut on the public market.
"Large and important companies like AstraZeneca are seeking a valuation uplift from exposure to a wider investor base and they will get that from moving to a US listing," BRI's Meadows told CNBC via email on Wednesday.
"The trend to move listing, or the stream of takeovers for UK listed stocks, highlights value in the UK equity market, but it does nothing to encourage a new supply of companies listing here to support the future standing of the index in a Global context," Meadows added.
Claire Trachet, founder of M&A advisory Trachet, said AstraZeneca shifting its listing to New York would represent "a memorable loss" for the London Stock Exchange.
"Given the complexity of the company, this isn't simply because of liquidity or valuation advantages often cited by departing firms, rather a trifecta of underperforming capital markets, regulatory constraints, and misaligned incentives that make it harder to scale and reward innovation at home," she told CNBC by email.
Trachet added that London-listed companies with a combined value in excess of $100 billion had already made the move to New York in recent years — and AstraZeneca's departure alone would more than double that figure.
"The potential move makes it painfully clear to global markets that the UK is losing its edge on the needs of world-class, scale-driven companies," she said. "This isn't an isolated story — and that's the biggest issue. It's part of a broader shift, where founders and boards are increasingly looking to the US for deeper capital, stronger support, and a more ambitious investor base."
Tom Bacon, a London-based partner at global law firm BCLP — which has a division dedicated to M&A and corporate finance — labeled reports of AstraZeneca's Soriot's desire to shift away from London "very worrying."
"I think this should sound the alarm for the UK government that they need to do more both to support the city and our stock market together with our critical industries like life sciences and pharmaceuticals," he said.
Dan Coatsworth, investment analyst at AJ Bell, on Wednesday said that AstraZeneca's reported plans appeared to be driven by business needs rather than chasing a higher valuation — but he added that moving the company's listing across the Atlantic "won't be an easy move to pull off."
"Unlike many other UK market 'defectors' with a dominant US shareholder base like CRH and Flutter, AstraZeneca has a more geographically diverse pool of investors," he explained in an email.
However, Coatsworth noted that AstraZeneca generates around 42% of its sales from the U.S., and already has plans to increase its operational footprint in the country.
Earlier this year, CEO Soriot told CNBC AstraZeneca was "very committed to the United States," where the company has two large research and development centers.
AJ Bell's Coatsworth told CNBC that AstraZeneca's CEO could also see a full U.S. stock listing as a "stepping stone to receiving better treatment Stateside."
European pharmaceutical companies are facing uncertainty around their future in the American market, where U.S. President Donald Trump has threatened to impose sector-specific tariffs on drug imports.
While the industry was exempted from Trump's so-called reciprocal tariffs plans when they were unveiled in April, the White House leader has since placed the sector under investigation by the U.S. Commerce Department, warned tariffs on pharma are "coming soon," and signed an executive order directing medicine manufacturers to lower the price of some drugs in line with costs paid overseas.