Why Just Eat is Leaving the London Stock Exchange: Costs, Competition, and Complexities

When a household name like Just Eat Takeaway announces it’s delisting from the London Stock Exchange (LSE), the story isn’t just about one company—it’s a lens into broader economic themes. What makes a firm decide to exit one of the world’s oldest and most renowned financial markets?

The Economics of Delisting

The move by Just Eat Takeaway to shift exclusively to the Amsterdam Stock Exchange reflects a growing trend where firms are reassessing the value of multiple stock listings. Here’s the crux of Just Eat’s reasoning: being listed on the LSE simply wasn’t worth the cost. The company cited the “administrative burden, complexity, and costs” of maintaining a presence in London.

Public limited companies (plcs) benefit from raising capital through stock markets, but this comes at a price. Compliance with regulatory requirements, satisfying disclosure rules, and managing multiple listings can be costly—especially if trading volumes and investor interest don’t justify the effort. In the case of Just Eat, low liquidity and trading volumes on the LSE were critical factors.

Market Signals: What Low Liquidity Means

Liquidity—the ease with which shares can be bought or sold without significantly affecting their price—is a key factor in attracting investors. Low liquidity can deter trading, making a listing less attractive for both the company and its shareholders. Analysts point out that British shares often trade at a significant discount compared to global peers, which makes it harder for UK-listed firms to raise capital.

For Just Eat, this discount combined with intensifying competition in the food delivery sector post-pandemic meant London’s market wasn’t serving its growth strategy effectively. The company’s spokesperson framed the delisting as part of a broader efficiency drive to "accelerate growth."

Regulatory Complexities and Competitive Pressures

The decision also shines a spotlight on the UK’s regulatory environment. Despite recent reforms by the Financial Conduct Authority (FCA) aimed at modernizing listing rules, they’ve yet to reverse a troubling trend: companies are either avoiding or leaving London. While the reforms may eventually encourage more domestic IPOs, they didn’t address the immediate challenges of firms like Just Eat with secondary listings in London.

Competition in the food delivery market adds another layer. Post-COVID, firms like Just Eat have grappled with declining demand and increased rivalry. This has led to cost-cutting measures, such as selling its US arm, Grubhub, at a loss and consolidating listings to reduce administrative expenses.

The Bigger Picture: Is London Losing Its Luster?

Critics argue that Just Eat’s departure is symptomatic of a larger problem for the UK’s financial markets. Some analysts note that the UK struggles to retain and attract high-growth firms, particularly in tech and innovative industries. Chancellor Rachel Reeves recently met with tech leaders to boost investment in the UK, but actions may need to go beyond rhetoric.

London’s equity markets have long been seen as a global hub, but competition from cities like Amsterdam and New York is intensifying. Factors such as Brexit, market liquidity issues, and regulatory burdens may be eroding its appeal.

Lessons for Economics Students

Just Eat’s story illustrates several important economic principles:

1. Cost-Benefit Analysis: Firms constantly weigh the costs of compliance and complexity against the benefits of raising capital in a given market.
2. Liquidity and Investor Behaviour: The attractiveness of a stock market depends on how easily shares can be traded without significant price fluctuations.
3. Market Structures and Competitiveness: Regulatory environments influence where firms choose to list, impacting national economies.
4. Globalization in Finance: Firms now have greater flexibility to choose markets that align with their strategic goals, reflecting the interconnectedness of global financial systems.

Glossary

• Liquidity: The ability to quickly buy or sell assets without causing a significant change in price.
• Public Limited Company (plc): A firm whose shares are traded on a stock exchange and is subject to stricter regulatory standards.
• Delisting: The process of removing a company’s shares from being traded on a stock exchange.
• Compliance Costs: Expenses associated with adhering to regulations, such as reporting and disclosure requirements.
• Equity Markets: Markets where shares of companies are issued and traded.
• IPO (Initial Public Offering): The process by which a private company offers its shares to the public for the first time.

Graham Watson's insight:

In general, we often assume that firms are keen to grow and eventually become public limited companies with their shares listed on the stock exchange, principally because it's a good way of increasing your access to sources of finance.

However, we should also remember that being a 'plc' comes with a cost, something that's made explicit by Just Eat's decision to delist from the London Stock Exchange and simply have a listing on the Amsterdam Stock Exchange which they are attributing to the “complexity and costs” associated with the listing.

Key Data Summary

• Just Eat Takeaway delisting from the LSE, focusing on Amsterdam Stock Exchange.
• Reasons: high regulatory costs, low liquidity, and limited trading volumes in London.
• Broader economic context: UK shares trade at a 40-60% discount to global peers.
• Regulatory reforms in the UK aim to modernize markets but haven’t stemmed the outflow of firms.

Retrieval Questions for A-Level Students

1. Why do firms list their shares on stock exchanges, and what are the potential downsides?
2. What were the main reasons cited by Just Eat for delisting from the London Stock Exchange?
3. Explain the concept of liquidity and why it is important for stock markets.
4. What economic challenges does the UK face in retaining companies on its stock exchange?
5. How does Just Eat’s decision reflect broader trends in global finance and market competition?

With stories like Just Eat’s, economics comes alive, showing how decisions at the corporate level ripple through markets and national economies. Let’s keep asking the tough questions about what this means for the UK’s financial future!