As 2025 draws to a close, the long-standing rivalry between the London and New York stock exchanges has reached a definitive turning point. For years, the narrative has been one of "de-equitization" in the United Kingdom, as high-growth firms fled for the deeper pockets and higher valuations of Wall Street. However, the news that Elliott Investment Management is finalizing plans for a massive 2026 Initial Public Offering (IPO) of its combined bookselling empire—Waterstones and Barnes & Noble—has sent a shockwave through the financial world.

In a surprising twist, Elliott has reportedly signaled its preference for the London Stock Exchange (LSE:LSEG) over the New York Stock Exchange (NYSE: ICE), providing a vital "proof of concept" for the UK’s aggressive post-Brexit regulatory reforms. This decision comes at a critical moment for the City of London, which spent much of 2024 and 2025 watching industrial giants and tech firms migrate across the Atlantic. The bookseller IPO represents more than just a retail flotation; it is a high-stakes test of whether London can reinvent itself as the premier destination for cash-generative, "real economy" businesses.

The Resurrection of the Physical Bookstore

The proposed IPO, expected to debut in early 2026, marks the culmination of a remarkable turnaround for the world’s two most prominent physical booksellers. Under the stewardship of James Daunt—the CEO of both Waterstones and Barnes & Noble—the combined group has defied the "retail apocalypse" narrative. By December 2025, the group reported annual profits of approximately $400 million on $3 billion in sales. Barnes & Noble alone opened 67 new stores in the U.S. during 2025, a expansion rate not seen in decades, while Waterstones saw its pre-tax profits nearly quadruple over the last two fiscal years.

Elliott’s strategy has centered on a "boutique" model that empowers local store managers to curate their own stock, a move that has successfully differentiated the chains from the algorithmic efficiency of Amazon (NASDAQ: AMZN). The timeline leading to this moment began in 2018 with Elliott’s acquisition of Waterstones, followed by the $683 million takeover of Barnes & Noble in 2019. After years of store closures and declining relevance, the 2025 financial results have paved the way for a public exit. Market reactions to the London listing news have been cautiously optimistic, with UK fund managers welcoming the prospect of a high-quality, dividend-paying retail stock.

Winners and Losers in the Exchange War

The London Stock Exchange Group (LSE:LSEG) stands as the primary beneficiary of Elliott’s decision. After losing major names like Flutter Entertainment (NYSE: FLUT) and the construction giant Ashtead Group (LSE:AHT), which confirmed its move to New York earlier this month, the LSE desperately needed a high-profile win. A successful bookseller IPO could stem the tide of "valuation envy" that has plagued the UK market. For the LSE, the win is psychological as much as financial, proving that the exchange can still attract global brands with significant U.S. footprints.

Conversely, the New York Stock Exchange (NYSE: ICE) and Nasdaq (NASDAQ: NDAQ) may view this as a minor setback in their otherwise dominant streak. While the U.S. exchanges continue to lead in total capital raised, the Elliott case study suggests that not every company is a fit for the high-growth, high-volatility environment of Wall Street. The "losers" in this scenario may be the U.S. retail investors who miss out on a steady, cash-flow-heavy business, while the "winners" include UK pension funds that have been under intense pressure from the government to increase their domestic equity allocations.

A Shift in Market Identity and Regulation

The Elliott IPO fits into a broader trend of "bifurcation" between global markets. While the S&P 500 continues to trade at a premium, with forward Price-to-Earnings (P/E) ratios around 22x, the FTSE 100 remains valued at a more modest 12x. This valuation gap has historically driven companies away from London, but the Financial Conduct Authority (FCA) reforms of July 2024 have begun to change the calculus. By simplifying listing categories and allowing for dual-class share structures, the UK has removed many of the technical barriers that previously deterred founders and private equity firms.

The decision to list the booksellers in London highlights a strategic pivot: companies are no longer just looking for the highest valuation, but the right valuation. For a business like a bookseller—which offers steady, predictable growth rather than the exponential "hockey stick" projections of a tech startup—the UK market's focus on dividends and fundamental value (often compared to the success of UK retailer Next (LSE:NXT)) is increasingly attractive. This suggests a future where London ceases to compete with Nasdaq for the next AI giant and instead doubles down on its role as the global hub for mature, international "real economy" enterprises.

The Road to 2026: What Comes Next?

In the short term, the market will be watching the formal appointment of investment banks for the Elliott IPO in early 2026. The success of this flotation will likely determine the fate of other "on-the-fence" companies. If the bookseller group achieves a healthy "re-rating" upon listing, it could provide the necessary cover for energy giants like Shell (LSE:SHEL) or TotalEnergies (NYSE: TTE) to remain in European markets rather than succumbing to the siren call of a U.S. primary listing.

However, challenges remain. The UK must still address the underlying issue of domestic capital flight. While regulatory rules have been eased, the pool of available capital in London is still smaller than in New York. We may see a strategic pivot where the LSE markets itself more aggressively to Middle Eastern and Asian sovereign wealth funds to compensate for the decline in domestic pension fund participation. The outcome of the Elliott IPO will serve as a bellwether for whether these "New London" reforms can actually translate into a sustained IPO pipeline.

Conclusion: A Transatlantic Balancing Act

The competition between the London and New York stock exchanges is no longer a simple story of decline versus dominance. The potential Elliott-backed bookseller IPO demonstrates that the LSE is carving out a specific, defensible niche. By focusing on cash-generative businesses that value stability over speculative growth, London is positioning itself as a necessary counterweight to the tech-heavy U.S. markets.

For investors, the coming months will be a period of intense observation. Key metrics to watch include the final valuation of the Waterstones/Barnes & Noble entity and the level of institutional oversubscription. If Elliott manages to successfully float this transatlantic retail giant in the City, it will mark the most significant victory for the London Stock Exchange in the post-Brexit era, signaling that while New York may have the scale, London still has the specialized appeal to host some of the world's most iconic brands.

This content is intended for informational purposes only and is not financial advice.