Tech leaders have called on government to ramp up efforts to overhaul listings rules after the owner of British chipmaker Arm indicated it would shun the London Stock Exchange in favour of a New York listing.
Japanese conglomerate Softbank, which owns Arm, said yesterday it was looking to float the firm on Nasdaq after a blockbuster $40bn takeover bid by American rival Nvidia fell through.
Government has been consulting with tech bosses in recent weeks as it looks to attract more tech firms into going public in the capital, and tech leaders spoken to by City A.M. said the move from Arm showed there was still work to be done.
“If we could get Arm to stay and list in the UK that would be a very significant win, and would show the London Stock Exchange can be a real anchor for more tech businesses that want to list here,” said Russ Shaw, Boss of Tech London Advocates.
“But this is going to be a hard slog over the coming years.”
Government is expected to throw its full weight behind a charm offensive in the coming weeks to woo Softbank into a London listing for Arm, but Shaw said there was still regulatory and systemic obstacles preventing tech firms from seeing London as an attractive location to take businesses public.
“You have huge amounts of tech analysts covering the NASDAQ but you don’t necessarily have the same depth of tech analysts covering the sector here, which prevents institutional investors receiving the same in-depth reporting and information.
“That’s another advantage that the NASDAQ or listing in the US brings.”
Downing Street last week hosted a number of tech bosses to discuss a further overhaul of regulation to tempt firms into listing in London, and City A.M. revealed that government was considering an overhaul of current rules that restrict analysts’ research on some listed tech firms in the UK.
Janine Hirt, boss of UK fintech body Innovate Finance, said the government needs to push ahead with regulatory changes if London is to compete as a global destination for listings.
“We – industry, government and the regulators – need to move ahead and build on the current momentum we already have: continue altering the listings regime for the better and make it more attractive for founders; be more vocal about our FinTech success stories; ensure regulation does not fall behind and continues to allow innovation to thrive while still protecting the consumer, including in emerging sectors like Crypto and Buy Now Pay Later,” she said.
“We also need to work to change the mindset of domestic investors about FinTech so they feel comfortable and ready to invest.”
Hirt stressed that the UK could compete with the US as a destination for listings by building on overhauls of the sector introduced by the Kalifa review of Fintech and Lord Hill’s review of the listing regime last year.
“The UK has strengths in areas that the US falls short on – a very proactive regulator, a supportive government that has shown its commitment to the FinTech sector by quickly moving forward on a number of critical Kalifa Review recommendations, and strong national connectivity,” she said.
The clustered nature of UK finance and regulation also offers the UK an advantage, Hirt said, as opposed to the sprawling US system spread across Silicon Valley, New York, and Washington DC.
But GP Bullhound a British tech advisory and investment firm which recently shunned London to list a $200m Special Purpose Acquisition Company (Spac)in Amsterdam, says there are still major structural and systemic challenges to overcome if London is to become a major tech IPO capital.
“So much great work has gone into creating unicorn companies and global household tech names – which we then eventually lose to the US markets. That is a core problem that needs addressing and we need to change how we perceive loss-making businesses,” Manish Madhvani, Co-founder and Managing Partner at GP Bullhound, told City A.M.
“If we don’t do that in the UK, we will keep losing valuable businesses to the US – and along with it the investment, the intellectual capital and wider growth of the ecosystem. We need a change of mindset and get braver with backing high-growth businesses.”
Madhvani said that government should prioritise an overhaul of Spac listing to to show it is a dynamic place for tech businesses to float.
“That’s where London needs to focus next – there is clear market demand for SPAC listings, and the UK listing rules should be restructured with that in mind,” he said.