LSE non-exec takes an initial stake as Brexit looms

The London Stock Exchange (LSE) will close out 2020 with a flurry of activity. The trading backdrop has swung from simply challenging to outright surreal at times, but the LSE has taken steps to reposition the business in the face of profound political change, while expanding the range of services on offer.

It may be premature to suggest that 2020 will prove to be a watershed for the LSE, but the transformative steps taken by the group indicate that management has been proactive in the face of the underlying threats to London’s primacy among Europe’s financial hubs, Brexit chief among them.

It is thought that the service offering will be enhanced during the first quarter of 2021, as the $27bn (£19.9bn) scrip deal to acquire data/analytics company Refinitiv has already received 16 merger control clearances, while “good progress has been made” in relation to outstanding jurisdictions. The European Union’s competition officials are due to rule on the reverse takeover in January. Meanwhile, the proposed divestment of the Borsa Italiana group will help to address Brussels’ wider antitrust concerns; a key consideration due to our imminent departure from the trading bloc.

Shareholders in the group will be hoping that clarity on the issue of Europe will precipitate a step-up in volumes and admission activity through 2021. The number of initial public offerings across Europe look anaemic set against listing activity in the US and the Asia-Pacific region through the year, but at least London took pole position by aggregate funds raised, some £11.3bn, or around 40 per cent of the total garnered on European bourses, although London officials can probably thank THG (THG) for that.

It has certainly been a tumultuous year for the LSE, with the twin challenges posed by Brexit and Covid-19, but there is every chance that resolution on both fronts will improve sentiment towards UK equities and, by extension, the fortunes of the LSE. Presumably, Dominic Blakemore has bought into this narrative. The non-executive director has taken an initial stake in the group through a hefty purchase of 928 shares at around £86 apiece. Hold at £88.54.

Last IC view: Hold, 8,518p, 26 Aug 2020