London Stock Exchange tanks as Refinitiv costs spook investors

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London Stock Exchange PLC (LON:LSE) shares slumped by more than 12% as investors took fright at the costs of integrating recent acquisition Refintiv.

Broker Citigroup lowered its rating from ‘buy’ to ‘neutral’ due to the impact of additional spending to get Refinitiv’s tech platform up to speed. 

“A need to improve the resilience of the legacy Refinitiv tech platform, suggests the bulk of the incremental €150mln operational expenditure investment will recur in 2022 and beyond,” the broker said, adding that makes it hard to achieve earnings per share accretion this year.

Credit Suisse added that the cost numbers had ‘spooked’ the market.

Earlier, the London exchange owner had said that listed firms raised the most money in more than a decade over the past year as they battled with the impact of coronavirus.

The pandemic highlighted the importance of access to liquidity and the ability of firms to raise equity capital efficiently added the bourse, which is facing increasing competition from Europe.

In January, trading in Amsterdam in euro-denominated shares outstripped the UK for the first time.

The exchange added that post-Brexit it is still lobbying for a coherent financial structure between Britain and the EU to be established to avoid fragmentation of systems designed to make ‘the financial markets efficient, stable and safe’.

In 2020, 526 businesses raised £34.4bn in follow-on capital, or 113% more than in 2019 with AIM also seeing strong activity.

New listings were also healthy, it added, with £9.2bn raised through IPOs, up 27% from 2019, while fixed income generated over £718bn, up 77% from 2019 of which £75bn came from COVID-19 response bonds.

Since the year-end, LSE has completed the acquisition of data and indices specialist Refinitiv for US$27bn which will completely re-shape the business and make capital markets far less important.

David Schwimmer, chief executive, said early work integrating Refinitiv had confirmed the quality of the business and the extent of the opportunities across the group.

Total revenue in 2020 increased by 3% to £2.12bn with clearing activities seeing a 7% jump and FTSE Russell 3% higher. On an underlying basis, capital markets revenue rose by 8%.

 Pre-tax profits rose by 5% to £685mln with the full-year dividend rising by 7% to 75p.

Shares fell 12.3% to 8,326p.

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