HEALTHCARE SERVICES group United Drug is the latest Irish public company to change its main stock exchange listing from Dublin to London. Its decision comes after similar moves by other major Irish companies in recent months. How many more companies are set to follow? In the past year CRH, Greencore and Elan have all done so, with the latter switching its primary listing to New York. CRH, the largest company on the Irish exchange with a market value of almost €11 billion, retains a domestic presence with a secondary listing in Dublin and a much lower investor profile.
This rapid exodus by so many of Ireland’s top quoted companies shows no sign of slowing. It represents a damaging blow to the Irish Stock Exchange at a critical time as a weak domestic economy is beset by low growth, high unemployment and major fiscal challenges. Never was there a greater need for a stock exchange to fulfil its traditional role: that of helping companies to raise funds to develop their business, by selling shares to the public.
The Irish exchange is no longer performing that role. New companies opting to list on the Irish exchange have not offset – either in size or number – those that have delisted. Anglo Irish Bank, facing insolvency, was nationalised and has delisted. So too has Irish Life and Permanent. Other former financial blue chips AIB and Bank of Ireland, having shed 99 per cent of their market value from peak to trough, now languish as penny stocks. Stock exchange turnover, which reflects the volume of equity trading on the exchange, stood at some €200 billion in 2007. By last year the figure had dropped more than four-fifths to €36 billion. For the stockbroking companies that own the Irish stock exchange, which has operated since 1793, such a dramatic fall in trading activity has added to their financial difficulties.
The companies that have delisted have done so for a range of reasons. For CRH, delisting was a logical move as most trading in its shares had shifted to London. CRH is now one of the constituents of the FTSE 100 index of top UK companies. For United Drug, less than one third of its profits are generated in Ireland and a move to London can be seen as a means of raising its profile with a much bigger pool of potential investors. When Ardagh, which delisted from the Irish market more than a decade ago, returns later this year as a major glass and packaging group, it will list in New York not Dublin.
Increasingly the Irish exchange finds itself with a residue of companies of small size in a market that is illiquid, with too few buyers and sellers and too many companies with low daily trading volumes. If the exodus of large companies continues at its present rapid pace, there will not be a meaningful Irish stock market of sufficient size and variety to sustain investor interest within a matter of years.
CRH’s departure a year ago was a wake-up call. Unfortunately it was one the brokers, the stock exchange and indeed the Government have either not heard or failed to heed.