London Stock Exchange Group finds itself at a crossroads as CEO David Schwimmer prepares to deliver the company’s 2025 financial results this Thursday, facing mounting pressure from declining stock values and an influential activist investor demanding changes.
The exchange and financial data company has seen its share price tumble approximately 30% over the past twelve months, while activist investment firm Elliott Management has recently taken a stake in the business and is pushing for operational improvements.
Schwimmer, a former Goldman Sachs executive who assumed leadership in 2018, faces several challenging options to turn around the company’s fortunes, according to industry analysts and investors. These potential strategies include implementing multi-billion pound share buyback programs, demonstrating the value of LSEG’s data offerings in an artificial intelligence-dominated marketplace, reducing operational expenses to improve profit margins, and potentially divesting certain business units.
ACTIVIST INVESTOR ENTERS THE PICTURE
Under Schwimmer’s leadership, LSEG completed a massive $27 billion acquisition of financial data provider Refinitiv in 2019, transforming the company from primarily operating London’s stock exchange into a comprehensive data and markets enterprise. Three years later, the company forged a decade-long artificial intelligence and cloud computing alliance with Microsoft.
Despite these strategic moves, LSEG’s stock performance has fallen behind competing exchanges and data companies. Recent weeks have brought additional selling pressure as investors worry that AI technology could undermine the company’s core business operations. Elliott Management, known for its aggressive activist approach, recently disclosed its shareholding position while seeking performance enhancements.
“The management team needs to demonstrate that they have the credibility to take LSEG to the next stage,” stated Stephen Yiu, chief investment officer of the Blue Whale growth fund, which holds LSEG shares. Yiu mentioned he’s maintaining his position, established in December 2023, while monitoring progress indicators and Elliott’s influence.
LSEG responded in a company statement: “LSEG maintains an active and open dialogue with our investors, while remaining focused on executing our strategy.” Elliott Management, recognized for its persistent activist campaigns, refused to discuss specific demands made to LSEG or confirm details about its share acquisition.
It’s worth noting that LSEG serves as Reuters’ primary customer, with the news service supplying content for LSEG’s Workspace terminals and additional products.
Several major shareholders continue supporting Schwimmer’s strategic direction. Lindsell Train, among LSEG’s top five investors, wrote in a February communication that the company’s stock decline reflected broader weakness in software and data sector stocks, stating they could “point to no operational failings to account for the recent share price falls.” All sixteen analysts covering LSEG currently recommend purchasing the stock, with several suggesting AI-related concerns are excessive.
Last October, Schwimmer argued that artificial intelligence cannot replace LSEG’s services. “For those who think AI models can scoop up so-called public data from the internet and displace us, that just does not reflect how this industry works and fundamentally ignores the non-replicable nature of the vast majority of our data,” he explained.
Financial analysts project LSEG will report adjusted pretax profits of 3.3 billion pounds, representing an increase from 2.97 billion pounds recorded in 2024, based on company-compiled forecasts.
ELLIOTT TARGETS PROFIT MARGIN IMPROVEMENTS
LSEG’s annual subscription value growth, which measures subscription revenue expansion across primary business segments, has stagnated in recent years.
The company initially boosted this metric by reducing customer departure rates, according to analyst observations. Annual subscription value growth surged from 4.6% to 6.2% between 2021 and 2022 but subsequently declined to 5.6% in the latest quarterly report, partially due to one-time impacts from Credit Suisse’s account consolidation.
Elliott believes LSEG’s profit margins trail industry competitors and has prioritized margin improvement in its demands, according to a source with knowledge of the situation. While Reuters couldn’t confirm specific steps Elliott is advocating, internal AI implementation to enhance operational efficiency represents one possibility, the source indicated.
The activist investor is also urging Schwimmer to more aggressively counter suggestions that AI threatens LSEG’s business model and provide clearer explanations of the Microsoft partnership’s advantages, the source revealed.
Schwimmer has characterized the Microsoft agreement as “transformative” and predicted “meaningful” revenue benefits beginning in 2025.
However, some analysts and investors remain unconvinced by the partnership’s results. “The partnership has failed to deliver so far and other companies are moving much faster,” Blue Whale growth fund’s Yiu observed.
Microsoft declined to provide commentary on the matter.
POTENTIAL ASSET SALES AND SHARE BUYBACKS
Elliott, which oversees approximately $80 billion in assets, is encouraging LSEG to evaluate its business portfolio and believes the company can support a 5 billion pound share buyback program, the source disclosed. LSEG did not respond to Reuters’ inquiry regarding this information.
UBS analysts estimate that if LSEG were valued using similar metrics as industry peers, the company could be worth around 47 billion pounds. Wednesday’s closing market valuation stood at 39 billion pounds.
Elliott views FTSE Russell, LSEG’s indexing division, and LCH, its clearing operations, as undervalued within the larger organization, the source explained. The company could also consider selling portions or all of its 51% ownership in Tradeweb, currently valued at nearly $13 billion based on market prices, the person added.
Breaking up the company would essentially represent Schwimmer acknowledging his strategy’s shortcomings, according to someone who has collaborated with him. Schwimmer has characterized LSEG’s divisions as “great trophy assets on their own” that become more valuable through integration, emphasizing the company’s efforts to connect its products more closely.
Multiple analysts and a shareholder told Reuters they favored increased buyback programs but expressed caution regarding significant asset sales.
“We think it would be the wrong decision,” said Ben Needham, portfolio manager at Ninety One, ranking among LSEG’s top-20 shareholders. “You get a higher share price because of it; it would no doubt be accretive to where the market is today. But instant gratification isn’t a way of creating long-term value.”
