Tech Companies Avoiding UK for IPOs

Tech companies have determined that the United Kingdom is not the place to launch their initial public offerings.

This observation follows the decision of British semiconductor designer Arm to list in New York, CNBC reported Monday (May 8).

The report attributed tech companies’ wariness about listing in the U.K. to the local investors’ treatment of high-growth tech companies and to Brexit.

As to how tech companies have fared recently when listing in the U.K., the report pointed to food delivery firm Deliveroo, which went public in 2021 and has since seen its stock drop 70%, and money transfer business Wise, which did a direct listing the same year and has since fallen 40%.

Venture capitalists told CNBC that institutional investors in London look for stocks that will yield dividends rather than high growth, that the investors don’t understand the tech sector, and that the market is known to be “very problematic.”

Another contributor to tech companies’ doubts is Brexit, according to the report.

While the funds raised by companies listing in Europe fell between 76% and 80% in the first nine months of 2022, those raised in the U.K. dropped 93% during the same time, the report said.

Brexit harmed the image of the U.K. as a place for IPOs in the eyes of the rest of the world, per the report.

In attempts to reverse the trend, the government announced reforms in December — including one allowing firms to issue dual-class shares — and the Financial Conduct Authority (FCA) proposed additional changes last week, according to the report.

Arm, which is a subsidiary of SoftBank Group, announced April 29 that it was planning an IPO.

The organization said it confidentially submitted a draft registration on Form F-1 — a filing that is required for the registration of certain securities by foreign issuers — to the U.S. Securities and Exchange Commission (SEC) relating to a proposed IPO.

“The size and price range for the proposed offering have yet to be determined,” Arm said at the time.

Bloomberg reported May 1 that SoftBank Founder Masayoshi Son has made Arm’s IPO a strategic focus and has said he wants it to be the biggest IPO ever in the semiconductor industry.

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