Ryanair Set to Drop London Listing in a First Blaming Brexit
Ryanair Holdings Plc is poised to drop its London Stock Exchange listing, becoming the first major company to blame its departure on Brexit.
The Irish discount airline said Monday that it is weighing a delisting due to compliance headaches caused by Britain’s exit from the European Union. A growing number of companies are disappearing from the London stock market for a variety of reasons.
Airline ownership rules set decades ago to protect the industry in Europe have added a layer of complexity to the divorce that took effect at the start of this year. EU-based carriers must be owned and controlled from within the bloc, and with Brexit, U.K. nationals don’t qualify anymore.
Even after taking several steps to limit non-EU ownership, just over one-third of Ryanair’s shares are held from member states, Chief Executive Officer Michael O’Leary said in a Bloomberg TV interview. While the Dublin-based carrier will maintain its primary listing in the Irish capital, it needs to take added steps to bring the total over 50%.
“It’s an inevitable consequence of Brexit,” O’Leary said, adding that he expects the London departure to take place within six months. “We must be EU-owned and controlled, and delisting from London is a reasonably small initiative in that strategy.”
Ryanair shares were up 0.2% as of 11:23 p.m. in Dublin. They fell as much as 4.5% earlier, after second-quarter results missed estimates.
Ryanair may be the first major company to explicitly cite Brexit in pursuing a delisting, but the divorce has already put pressure on the LSE.
With U.K. equities trading at a discount to global indexes, London’s stock market is shrinking at one of the fastest paces among global listing centers. Cheap valuations have unleashed a flood of buybacks and encouraged a wave of acquisitions by foreign buyers and private equity houses.
Even as the U.K. government pursues wide-ranging changes to listing rules to lure more issuers to the City, big-name companies are leaving the market.
In August, the U.K.’s blue-chip FTSE 100 Index lost BHP Group, its second-biggest stock by market value. The mining giant is moving to a primary listing in Australia after collapsing a dual arrangement that dates back to the company’s creation two decades ago.
Brexit has also prompted British firms such as commercial landlord Hammerson Plc and warehouse group Segro Plc to seek secondary listings on EU exchanges to maintain access to the wider market.
The potential loss of Ryanair is uncomfortable for London following the BHP decision, said Danni Hewson, a financial analyst with AJ Bell in London.
Even so, “the nature of rules surrounding ownership of airlines makes Ryanair’s move less impactful,” Hewson said. “Brexit was already in the mix and though this is the first time a company has directly cited it as a reason for considering delisting, this decision is unlikely to herald a mass stampede from other EU corporates.”
Other U.K.-listed airlines have grappled with the rules as well.
British Airways owner IAG SA, which is incorporated in Spain but trades in London, also briefly banned share purchases from outside the EU. It has altered the ownership structure of its Irish and Spanish units.
An IAG spokeswoman said the airline complies with EU ownership rules. She declined to comment on the airline group’s geographic ownership breakdown. The company is 25% owned by Qatar Airways, and, like Ryanair, has a significant fraction of U.S. shareholders.
U.K.-based EasyJet Plc has said it would restrict voting rights of non-EU investors if necessary. Hungary’s Wizz Air Holdings Plc is also listed in the U.K.
Alex Irving, an analyst at Bernstein, said he “can’t see the three airlines that have a primary listing in London changing. The circumstances are very different.”
More Forced Sales?
Ryanair will continue to be listed on the Euronext Stock Exchange in Dublin, with its American depositary receipts traded on Nasdaq. Less than 10% of the carrier’s shares are now traded through London, Chief Financial Officer Neil Sorahan said in a separate interview.
The airline has already restricted British shareholders, banning non-EU citizens from buying its ordinary shares and eliminating their voting rights as the breakup took effect at the start of this year. In September, it forced the sale of 1 million shares purchased since the breakup out of compliance with its ownership rules.
More forced sales are possible, O’Leary said, as the company works up toward at least 50% EU ownership.
In terms of the wider impact on the U.K. market, “it’s certainly a blow but I don’t think it’s really a step change,” said Nicholas Hewitt, an analyst with Hargreaves Lansdown. “Ryanair doesn’t have a premium listing so isn’t included in any of the major indices – making it less of a substantial change than when BHP scrapped its dual listing structure.”
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