(Bloomberg) —
London’s struggles to lure more listings by tech companies suffered another setback, with flagship U.K. chip designer Arm Ltd. heading for U.S. markets.
SoftBank Group Corp. plans to list the British semiconductor company in New York after regulatory issues prompted Nvidia Corp. to walk away from a proposed $66 billion acquisition.
The decision on the initial public offering marks the latest in a line of tech firms opting for deeper investor pockets in the U.S., despite efforts by the U.K. to become more attractive. London has been fighting to protect its status as a global financial center since the U.K. left the European Union, and there’s a push to change some rules to attract business such as IPOs.
“If the U.K.’s largest home grown tech firm shuns London for New York it will be a major blow to London’s ambitions and will pile pressure on the government to speed up reforms,” said Susannah Streeter, a senior analyst at Hargreaves Lansdown Plc.
London was Europe’s top IPO venue in 2021, though cities such as Amsterdam are threatening its position.
The U.K. government is lobbying some of Europe’s largest tech startups in response, and recently hosted the likes of Klarna, Checkout.com and lender Oaknorth at 10 Downing Street. But a recent string of high-profile flops by food-delivery startup Deliveroo Plc, fintech Wise Plc and semiconductor business Alphawave IP Group Plc have undercut the charm offensive.
“The sentiment around tech listings in London is clearly not positive, with very weak performance post-listing of some well-publicized names,” said David Moss, co-head of global equities at BMO Global Asset Management. “The seller may expect a better understanding and reception for the business in New York.”
London-based money-transfer firm Zepz is considering a U.S. IPO at a $6 billion valuation, Bloomberg reported this month. Electric-vehicle manufacturer Arrival SA, online health firm Babylon Holdings Ltd. and used car dealer Cazoo Group Ltd. have all listed in New York via blank-check mergers over the past year.
Arm, one of the London Stock Exchange’s largest tech firms for nearly two decades before SoftBank took it private in 2016, could have been one of the U.K.’s biggest IPOs.
Still, this year’s sharp selloff in tech stocks as bond yields march higher has cast doubt on whether investors will be willing to cough up.
“My first concern would be about the $66 billion valuation now that we know that Arm can’t be taken over by a chip company,” said Gavin Launder, a fund manager at Legal & General Investment Management, noting that the valuation ambitions may play a part in choosing New York over London.
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