Investor tells FTSE 250 office group IWG to leave London for US to boost shareholder returns

London-listed office space provider IWG is facing pressure from a major investor to leave the FTSE 250 in favour of a US listing.

Leaving the UK for a US listing would help boost IWG shares, Miami-based Buckley Capital Management said in an open letter on Tuesday, after several successive years of lacklustre returns.

This would be another blow to London markets, which have seen senior executives leave, potential new listings lost on rival exchanges and companies going private amid a perception of widespread undervaluation and low returns.

Buckley, who says he is one of IWG’s “top 15” investors, said the consensus-beating earnings and management’s efforts to boost the share price “fell on deaf ears,” largely as a result of its listing on the London Stock Exchange.

IWG Shares have proven volatile over the past year, but are up 1.1 percent over the period and down nearly 60 percent over the past five years.

Noting that IWG already makes more than 50 percent of its profits in North America and recently changed its reporting currency to dollars, Buckley said a U.S. listing would present a “strategic opportunity to support shareholder returns.”

He added: ‘A US listing would expose IWG to a new and more liquid market with investors more appreciative of its leverage levels and business model.

‘An additional positive impact on share prices can be expected from greater passive buying of US indices than from passive selling of UK indices.

‘The more efficient US capital market can help the company realise intrinsic value in a more timely manner, something the UK market has failed to do over the past five years.’

Rumours that IWG is considering a move to the US emerged in May, when the group reported revenues of £912m for the first three months of the year and maintained its full-year guidance.

Chief executive Mark Dixon said at the time that the group was focusing on “delivering on our plan to grow with reduced capital expenditure”.

Buckley, who is also urging IWG to explore a share buyback programme, highlighted huge gains in building materials firm CRH’s share price after it moved its primary listing to the US in September last year.

The fund manager said: “We believe IWG’s decision to relist in the US would allow the company to command a higher multiple and potentially use its shares as currency for acquisitions.

‘Over the past 35 years, IWG has managed to become the undisputed leader in the coworking office market.

‘The company is now better positioned to benefit from the secular trend toward flexible leases and is in the process of transforming its business to a managed and franchised model with significantly lower capital requirements, higher cash conversion and greater stability.

‘Given the company’s market dominance, accelerated growth, lower capital requirements, higher conversion (of free cash flow) and greater stability, we believe IWG shares should trade at a higher valuation multiple today than in the past.’