{"id":22904,"date":"2023-05-08T08:10:40","date_gmt":"2023-05-08T08:10:40","guid":{"rendered":"http:\/\/107236551"},"modified":"2023-05-08T08:10:40","modified_gmt":"2023-05-08T08:10:40","slug":"a-very-problematic-market-as-arm-shuns-london-tech-investors-question-uk-as-an-ipo-destination","status":"publish","type":"post","link":"https:\/\/wp.worldtechguide.net\/a-very-problematic-market-as-arm-shuns-london-tech-investors-question-uk-as-an-ipo-destination\/","title":{"rendered":"&#8216;A very problematic market&#8217;: As Arm shuns London, tech investors question UK as an IPO destination"},"content":{"rendered":"<p><span class=\"HighlightShare-hidden\"><\/span><\/p>\n<div class=\"InlineImage-imageEmbed\" id=\"ArticleBody-InlineImage-107233160\" data-test=\"InlineImage\">\n<div class=\"InlineImage-wrapper\" readability=\"9.5\">\n<div readability=\"14\">\n<p>Billionaire Masayoshi Son, chairman and chief executive officer of SoftBank Group Corp., speaks in front of a screen displaying the ARM Holdings logo during a news conference in Tokyo on July 28, 2016.<\/p>\n<p>Tomohiro Ohsumi | Bloomberg | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"group\" readability=\"94.285888077859\">\n<p>The U.K. may be a great place to build a tech company \u2014 but when it comes to taking the crucial step of floating your business, the picture isn&#8217;t so rosy.<\/p>\n<p>That&#8217;s the lesson several high-growth tech businesses have come to learn in London.<\/p>\n<p>When <span class=\"QuoteInBody-quoteNameContainer\" data-test=\"QuoteInBody\" id=\"RegularArticle-QuoteInBody-1\"><span class=\"waslinkname\">Deliveroo<\/span><span class=\"QuoteInBody-inlineButton\"><span class=\"AddToWatchlistButton-watchlistContainer\" id=\"-WatchlistDropdown\" data-analytics-id=\"-WatchlistDropdown\"><button class=\"AddToWatchlistButton-watchlistButton\"><span class=\"AddToWatchlistButton-addWatchListFromTag\"><\/span><\/button><\/span><\/span><\/span> went public in 2021, at the height of a pandemic-driven boom in food delivery, the company&#8217;s stock <span class=\"waslinkname\">quickly tanked 30%<\/span>.<\/p>\n<p>Investors largely blamed the legally uncertain nature of Deliveroo&#8217;s business \u2014 the company relies on couriers on gig contracts to deliver meals and groceries to customers. That has been the subject of concern as these workers look to gain recognition as staffers with a minimum wage and other benefits.<\/p>\n<p>But to many tech investors, there was another, much more systemic, reason at play \u2014 and it&#8217;s been cited as a factor behind chip design giant Arm&#8217;s <span class=\"waslinkname\">decision to shun a listing in the U.K.<\/span> in favor of a market debut in the U.S.<\/p>\n<p>The institutional investors that dominate the London market lack a good understanding of tech, according to several venture capitalists.<\/p>\n<p>&#8220;It&#8217;s not the exchange, it&#8217;s the people who trade on the exchange,&#8221; Hussein Kanji, founding partner at London VC firm Hoxton Ventures, told CNBC. &#8220;I think they&#8217;re looking for dividend-yielding stocks, not looking for high-growth stocks.&#8221;<\/p>\n<p>&#8220;Two years ago, you could have said, you know what, it might be different, or just take a chance. Now a bunch of people have taken a chance and the answers have come back. It&#8217;s not the right decision.&#8221;<\/p>\n<p>Numerous tech firms listed on the London Stock Exchange in 2021, in moves that buoyed investor hopes for more major tech names to start appearing in the blue-chip <span class=\"QuoteInBody-quoteNameContainer\" data-test=\"QuoteInBody\" id=\"RegularArticle-QuoteInBody-4\"><span class=\"waslinkname\">FTSE 100<\/span><span class=\"QuoteInBody-inlineButton\"><span class=\"AddToWatchlistButton-watchlistContainer\" id=\"-WatchlistDropdown\" data-analytics-id=\"-WatchlistDropdown\"><button class=\"AddToWatchlistButton-watchlistButton\"><span class=\"AddToWatchlistButton-addWatchListFromTag\"><\/span><\/button><\/span><\/span><\/span> benchmark.&nbsp;<\/p>\n<p>However, firms that have taken this route have seen their shares punished as a result. Since Deliveroo&#8217;s March 2021 IPO, the firm&#8217;s stock has plummeted dramatically, slumping over 70% from the \u00a33.90 it priced its shares at.<\/p>\n<p><span class=\"QuoteInBody-quoteNameContainer\" data-test=\"QuoteInBody\" id=\"RegularArticle-QuoteInBody-5\"><span class=\"waslinkname\">Wise<\/span><span class=\"QuoteInBody-inlineButton\"><span class=\"AddToWatchlistButton-watchlistContainer\" id=\"-WatchlistDropdown\" data-analytics-id=\"-WatchlistDropdown\"><button class=\"AddToWatchlistButton-watchlistButton\"><span class=\"AddToWatchlistButton-addWatchListFromTag\"><\/span><\/button><\/span><\/span><\/span>, the U.K. money transfer business, has fallen more than 40% since its 2021 direct listing.&nbsp;<\/p>\n<p>There have been some outliers, such as cybersecurity firm <span class=\"QuoteInBody-quoteNameContainer\" data-test=\"QuoteInBody\" id=\"RegularArticle-QuoteInBody-6\"><span class=\"waslinkname\">Darktrace<\/span><span class=\"QuoteInBody-inlineButton\"><span class=\"AddToWatchlistButton-watchlistContainer\" id=\"-WatchlistDropdown\" data-analytics-id=\"-WatchlistDropdown\"><button class=\"AddToWatchlistButton-watchlistButton\"><span class=\"AddToWatchlistButton-addWatchListFromTag\"><\/span><\/button><\/span><\/span><\/span>, whose stock has climbed nearly 16% from its listing price.<\/p>\n<p>However, the broad consensus is that London is failing to attract some of the massive tech companies that have become household names on major U.S. stock indexes like the <span class=\"QuoteInBody-quoteNameContainer\" data-test=\"QuoteInBody\" id=\"RegularArticle-QuoteInBody-7\"><span class=\"waslinkname\">Nasdaq<\/span><span class=\"QuoteInBody-inlineButton\"><span class=\"AddToWatchlistButton-watchlistContainer\" id=\"-WatchlistDropdown\" data-analytics-id=\"-WatchlistDropdown\"><button class=\"AddToWatchlistButton-watchlistButton\"><span class=\"AddToWatchlistButton-addWatchListFromTag\"><\/span><\/button><\/span><\/span><\/span> \u2014 and with Arm opting to make its debut in the U.S. rather than the U.K., some fear that this trend may continue.<\/p>\n<p>&#8220;It&#8217;s a known fact that London is a very problematic market,&#8221; Harry Nelis, general partner at VC firm Accel, told CNBC.<\/p>\n<p>&#8220;London is creating, and the U.K. is creating, globally important businesses \u2014 Arm is a globally important business. The issue is that the London capital market is not efficient, essentially.&#8221;<\/p>\n<p>A London Stock Exchange spokesperson told CNBC: &#8220;Arm is a great British company and a world leader in their field which we continue to believe can be very well served by the U.K. capital markets.&#8221;<\/p>\n<p>&#8220;The announcement demonstrates the need for the U.K. to make rapid progress in its regulatory and market reform agenda, including addressing the amount of risk capital available to drive growth. We are working with regulators, Government and wider market participants to ensure&nbsp;U.K. capital markets provide the best possible funding environment for U.K. and global companies.&#8221;<\/p>\n<\/div>\n<h2 class=\"ArticleBody-subtitle\">The &#8216;B&#8217; word<\/h2>\n<div class=\"group\" readability=\"38.44199830652\">\n<p>Brexit, too, has clouded the outlook for tech listings.<\/p>\n<p>Funds raised by companies listing in London <span class=\"waslinkname\">plunged by more than 90% in 2022<\/span>, according to research from KPMG, with the market cooling due to slowing economic growth, rising interest rates, and wariness around the performance of British firms.<\/p>\n<p>Previously-published figures for the first nine months of 2022 place the fall in European funds raised at between <span class=\"waslinkname\">76%<\/span> and <span class=\"waslinkname\">80%<\/span> annually, indicating a less severe decline than the U.K.&#8217;s 93%.<\/p>\n<p>Hermann Hauser, who was instrumental in the development of the first Arm processor, blamed the firm&#8217;s decision to list in the U.S. rather than U.K. on Brexit &#8220;idiocy.&#8221;<\/p>\n<p>&#8220;The fact is that New York of course is a much deeper market than London, partially because of the Brexit idiocy the image of London has suffered a lot in the international community,&#8221; he told the BBC.<\/p>\n<p>Cambridge-headquartered Arm is often referred to as the &#8220;crown jewel&#8221; of U.K. tech. Its chip architectures are used in 95% of the world&#8217;s smartphones.<\/p>\n<p><span class=\"QuoteInBody-quoteNameContainer\" data-test=\"QuoteInBody\" id=\"RegularArticle-QuoteInBody-11\"><span class=\"waslinkname\">SoftBank<\/span><span class=\"QuoteInBody-inlineButton\"><span class=\"AddToWatchlistButton-watchlistContainer\" id=\"-WatchlistDropdown\" data-analytics-id=\"-WatchlistDropdown\"><button class=\"AddToWatchlistButton-watchlistButton\"><span class=\"AddToWatchlistButton-addWatchListFromTag\"><\/span><\/button><\/span><\/span><\/span>, which acquired Arm for $32 billion in 2016, is now looking to float the company in New York after failing to sell it to U.S. chip-making giant Nvidia for $40 billion.<\/p>\n<\/div>\n<div role=\"region\" aria-labelledby=\"Placeholder-ArticleBody-Video-107231291\">\n<div role=\"button\" tabindex=\"0\" id=\"Placeholder-ArticleBody-Video-107231291\" class=\"PlaceHolder-wrapper\" data-vilynx-id=\"7000296437\" data-test=\"VideoPlaceHolder\">\n<div class=\"InlineVideo-videoEmbed\" id=\"InlineVideo-0\" data-test=\"InlineVideo\">\n<div class=\"InlineVideo-wrapper\" readability=\"5.4690265486726\">\n<div class=\"InlineVideo-inlineThumbnailContainer\"><img decoding=\"async\" class=\"InlineVideo-videoThumbnail\" src=\"https:\/\/wp.worldtechguide.net\/wp-content\/uploads\/2023\/05\/a-very-problematic-market-as-arm-shuns-london-tech-investors-question-uk-as-an-ipo-destination.jpg\" alt=\"UK regulator blocks Microsoft\u2019s $69 billion acquisition of Activision Blizzard\"><span class=\"InlineVideo-videoButton\"><\/span><span><\/span><\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"group\" readability=\"20.598518518519\">\n<p>Despite three British prime ministers lobbying for it to list in London, Arm has opted to pursue a U.S. stock market listing. Last week it <span class=\"waslinkname\">registered confidentially<\/span> for a U.S. stock market listing.&nbsp;<\/p>\n<p>Developing research and development for cutting-edge chips is a costly endeavor, and Japan&#8217;s SoftBank is hoping to recoup its seismic investment in Arm through the listing.<\/p>\n<p>Arm is expecting to fetch <span class=\"waslinkname\">roughly $8 billion<\/span> in proceeds and a valuation of between $30 billion and $70 billion, Reuters reported, citing people familiar with the matter.<\/p>\n<p>Arm has said it would like to eventually pursue a secondary listing, where it lists its shares in the U.K. following a U.S. listing.&nbsp;<\/p>\n<\/div>\n<h2 class=\"ArticleBody-subtitle\">Is an IPO everything?<\/h2>\n<div class=\"group\" readability=\"31.809523809524\">\n<p>Still, regulators have sought to attract tech companies to the U.K. market.&nbsp;<\/p>\n<p>In December, the government rolled out a set of reforms aimed at enticing high-growth tech firms. Measures included allowing firms to issue dual-class shares \u2014 which are attractive to founders as they grant them more control over their business \u2014 on the main market.<\/p>\n<p>Last week, the Financial Conduct Authority also <span class=\"waslinkname\">proposed simplifying the standard and premium equity listing segments<\/span> as one single category for shares in commercial companies.<\/p>\n<p>This would remove eligibility requirements that can deter early-stage firms, allow for more dual-class share structures, and remove mandatory shareholder votes on acquisitions, the regulator said.<\/p>\n<p>Despite the negative implications of Arm&#8217;s decision, investors largely remain upbeat about London&#8217;s prospects as a global tech hub.<\/p>\n<p>&#8220;Fortunately for us, it doesn&#8217;t mean that the UK is not attractive to investors,&#8221; Nelis told CNBC. &#8220;It just means that where you IPO is just a financing event. It&#8217;s just a place, a venue where you get more money to grow.&#8221;<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Billionaire Masayoshi Son, chairman and chief executive officer of SoftBank Group Corp., speaks in front of a screen displaying the ARM Holdings logo during a news conference in Tokyo on July 28, 2016. Tomohiro Ohsumi | Bloomberg | Getty Images The U.K. may be a great place to build a tech company \u2014 but when &hellip;<\/p>\n","protected":false},"author":1,"featured_media":22905,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8],"tags":[],"hashtags":[],"_links":{"self":[{"href":"https:\/\/wp.worldtechguide.net\/wp-json\/wp\/v2\/posts\/22904"}],"collection":[{"href":"https:\/\/wp.worldtechguide.net\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/wp.worldtechguide.net\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/wp.worldtechguide.net\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/wp.worldtechguide.net\/wp-json\/wp\/v2\/comments?post=22904"}],"version-history":[{"count":0,"href":"https:\/\/wp.worldtechguide.net\/wp-json\/wp\/v2\/posts\/22904\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/wp.worldtechguide.net\/wp-json\/wp\/v2\/media\/22905"}],"wp:attachment":[{"href":"https:\/\/wp.worldtechguide.net\/wp-json\/wp\/v2\/media?parent=22904"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/wp.worldtechguide.net\/wp-json\/wp\/v2\/categories?post=22904"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/wp.worldtechguide.net\/wp-json\/wp\/v2\/tags?post=22904"},{"taxonomy":"hashtags","embeddable":true,"href":"https:\/\/wp.worldtechguide.net\/wp-json\/wp\/v2\/hashtags?post=22904"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}