Despite concerns about the London market’s attractiveness to tech companies following Arm’s decision to list on the Nasdaq last year, educational computer maker Raspberry Pi’s upcoming IPO on the London Stock Exchange offers a positive narrative. A recent survey found that a majority of British businesses would choose the LSE for a listing due to its perceived stability and understanding of homegrown tech stories. London’s attractiveness as a listing destination is further supported by CEOs of companies like Cuvva and Neo, who see the LSE as the leading option in Europe for raising cash.
However, not everyone agrees on London’s appeal. ReachX CEO Rafael S. Lajeunesse argues that the London stock market’s two-decade low for listings makes it a less attractive option for companies looking to go public. Brexit uncertainty has also affected investor sentiment, leading some British startups to flock to the New York Stock Exchange instead. Despite the lure of the U.S. markets, M&A and Corporate Finance advisor Tom Bacon warns that the data doesn’t support the idea that U.K. businesses going to the U.S. have been successful, with only a few priced higher than their IPOs.
The London Stock Exchange has seen little interest from rising stars in the innovation economy aside from Raspberry Pi due to various factors, including the economic cycle and the time, money, and scrutiny required to take a company public. Bacon believes that providing founders with a training ground through initiatives like the PISCES system can encourage more listing events by allowing companies to raise money from a wider group of investors while acclimatizing themselves to the idea of being public companies. Regulatory changes, such as removing requirements for shareholder votes on large transactions and a three-year trading record for listing, could also help address some of the constraints affecting public companies.
While there is a debate about whether valuations are higher in the U.S. markets, the issue of underallocation of UK equity by pension funds remains a challenge in the U.K. IPO environment. Institutions are reluctant to accept any mandation around asset allocation, making it a long-term goal to encourage them to hold more risk capital. Despite reports that London may not be as attractive to tech companies, there is work to be done to encourage more companies to list on the LSE and benefit from the reputational and financial advantages associated with public company status.
