British educational computer maker, Raspberry Pi, is set to list on the London Stock Exchange in an IPO that is expected to raise £38 million and value the company at £500 million. Despite concerns about the London market’s attractiveness to tech companies, Raspberry Pi’s commitment to a London IPO offers a welcome counter-narrative. This raises the question of how many founder-led companies will follow suit.
A recent survey by Lloyds Bank found that 81% of British businesses would choose the LSE for listing, citing stability and homegrown tech expertise as factors. London has been perceived as an attractive listing destination, with companies like Cuvva and Neo expressing support for the LSE. However, there are differing opinions, with some believing that the London stock market is facing challenges due to Brexit and a lack of listings.
Tom Bacon, a partner at law firm BCLP, warns that while U.S. markets may seem attractive, the data does not support the success of UK businesses listing in the U.S. Out of over 20 British companies that have listed in the U.S. in the past decade, most are trading down, with only two priced higher than the IPO. Despite this, there is still interest in exploring alternative exits like trade sales or private equity buyouts.
To encourage more companies to list in London, Bacon suggests the creation of a training ground for founders to raise money and prepare for public scrutiny. The Private Intermittent Securities and Capital Exchange System (PISCES) is a government initiative that aims to bridge the gap between private investment and the public markets. Additionally, regulatory changes may help address some of the constraints facing public companies.
One challenge facing the UK IPO environment is the reluctance of institutional investors, particularly pension funds, to allocate more capital to UK equity. This lack of risk capital affects the pool of investors available to support IPOs. Despite this, there is optimism that with the right support and regulatory changes, more companies may choose to list in London.
Overall, while there have been concerns about the attractiveness of the London market to tech companies, the upcoming Raspberry Pi IPO and support from some founders suggest that London could still be an attractive listing destination. With efforts to address regulatory constraints, encourage more listings, and attract more investors, there is hope that the London market could see a resurgence in the coming months.
