US activist Elliott builds stake in LSEG because it reels from the specter of AI and the exodus of companies from the UK market

Activist investor Elliott Management has built up a stake in London Stock Exchange Group (LSEG) as the historic City institution reels from the threat of artificial intelligence (AI) and an exodus of firms from the UK market.

New York-based Elliott, known for relentless campaigns for change at companies it invests in, is said to be pushing for better performance at the group.

LSEG’s shares have fallen more than 35 per cent over the past year including by nearly 8 per cent last week alone amid a $1trillion (£730billion) sell-off of global software stocks.

Elliott’s arrival on the share register of a listed firm strikes fear into boardrooms.

Led by billionaire Paul Singer, other recent targets include oil giant BP, which has since ousted its chief executive as it reverses its ill-fated pivot towards green energy.

Shares in LSEG spiked by more than 6 per cent after Elliott’s stake-building was reported by the Financial Times. 

Activist: Elliott Management, led by billionaire Paul Singer (pictured), has built up a stake in London Stock Exchange Group and is said to be pushing for better performance at the group

But they later gave up most of the gains to end just 0.2 per cent, or 14p, higher at 7382p. 

The size of Elliott’s exact shareholding was unclear, though UK rules require shareholders to disclose stakes above 3 per cent.

A source said the US firm has been in talks with LSEG in a bid to drive better performance, encourage a fresh share buyback and close the gap with rivals’ profit margins.

The FT reported that Elliott does not want LSEG to consider a full sale or spin-off of its stock exchange business.

Dan Coatsworth, head of markets at AJ Bell, said: ‘The market will be watching closely for Elliott to spell out how it plans to refocus LSEG and make money along the way.’

LSEG said: ‘LSEG maintains an active and open dialogue with our investors, while remaining focused on executing our strategy.’

Despite its name, the group is now more focused on its data and analytics business, boosted by its 2021 acquisition of the Refinitiv platform.

That now contributes 70 per cent of revenues while its capital markets arm – including the London Stock Exchange – accounts for just 30 per cent. 

The shift has left it vulnerable to the recent sell-off sparked by fears that the rise of AI bots will squeeze the income of software and services firms – and which hurt other London-listed firms including Relx and Sage.

At the same time, the stock exchange business is contending with an exodus of listed firms to rival financial centres such as New York, with recent examples including fintech Wise. 

A dearth of new listings in London has meant those firms are not being replaced – though hopes have been building that initial public offerings this year could help to revive it, helped by the FTSE 100’s recent spike to new record highs above 10,000.

Some analysts think the recent plunge in the LSEG’s share price has been overdone. But some shareholders welcomed Elliott’s intervention.

Stephen Yiu, chief investment officer of Blue Whale Growth Fund, said: ‘When you’ve got your core business under attack from AI, you need to really focus strategy and I don’t think that has been the case in the past few years.’

Elliott’s appearance on LSEG’s shareholder register follows a failed attempt in 2017 by activist investor TCI to oust its chairman, Donald Brydon.