IPOs: London under pressure to speed up reforms

Posted 8 Feb. 2022 at 18:03Updated Feb 8. 2022 at 06:22 PM

Bringing a tech heavyweight like Klarna to the London Stock Exchange. It would be a nice catch for the British government, which would thus have the opportunity to show that the post-Brexit reforms pay off. London has launched a veritable charm offensive with European tech companies. They were received last week by Treasury Secretary John Glen and Digital Secretary Chris Philp. Objective: to determine how the City can catch up with New York in terms of IPOs.

In the UK, tech companies raised £6.6 billion on the stock market last year. This is double the amount raised in 2020, even if it represents a small part of the sums raised on a global scale (68 billion pounds – 80 billion euros).

Rethinking its financial regulations

If the City was not at first sight favorable to Brexit, the exit from the European Union was an opportunity for the financial capital to rethink its financial regulations. Several consultations have been launched, such as that of Lord Hill on IPOs and that of Ron Kalifa on fintechs. They have already led to regulatory changes.

In December, the UK regulator, the Financial Conduct Authority (FCA), announced a relaxation of free float rules and the authorization of multiple voting share structures in the premium listing segment, where finds the largest listed companies.

These measures go hand in hand with an easing of the listing rules for SPACs, these funds which raise money on the stock market to buy companies. Since then, a first SPAC, Hiro Metaverse, has announced its listing in London, with the aim of targeting the video game sector in the United Kingdom.

But another company, GP Bullhound, has decided to list its fund in Amsterdam, a choice perceived in London as a warning. “Euronext Amsterdam was the first to adopt the new structure of SPAC from the United States”, explains the company, also referring to “the growth and maturity reached in recent years by European tech”.

Go further

If the British tech welcomes the first relaxations made by London, it considers that it is necessary to go further. “So far, the government has mainly addressed the issue on a regulatory level,” says Neil Ross, director of public affairs at TechUK. You have to look at the subject in a much more global way. London must remain attractive for skills but also for investment in R&D, via tax credits for example. »

The tech business lobby is recommending changes to pension fund regulations to incentivize them to invest more in private equity.

Favorable ecosystem

The challenge is to create an ecosystem favorable to investment, as is the case on the other side of the Atlantic. “The main difficulty for software companies is the fact that there is not a large enough ecosystem of analysts and investors in tech”, comments Suranga Chandratillake, partner at the London fund Balderton. As a result, British “unicorns” often choose to list in New York to be followed by analysts who understand their technology and business model.

Among those who have chosen London, the performance of the stock market has not always met expectations. Darktrace, a Cambridge cyber defense company, has seen its share price halve since November. Deliveroo, which listed in London in 2021, did not fare much better. Not enough to pave the way for the other candidates for listing.

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