Tech firms turn down offers to list on London's Stock Market
The world of tech startups is abuzz with a growing trend: most European companies that reach a billion-dollar valuation are increasingly choosing to list on the New York Stock Exchange (NYSE) over the London Stock Exchange (LSE). This shift is driven by several key factors that make the US markets more appealing for high-growth tech firms.
The NYSE and Nasdaq combined boast a market capitalization of over $50 trillion, more than three times that of Europe’s exchanges. This vast institutional investor base, including pension funds, mutual funds, sovereign wealth funds, and hedge funds, provides a larger and deeper pool of capital for tech companies[3].
The US has a strongly embedded equity culture where equities are the default for long-term wealth creation. This results in stronger post-IPO support and liquidity for companies listed in the US, particularly attractive for high-growth tech firms[3].
The regulatory environment in the US also offers advantages. Regulatory frameworks like the JOBS Act and foreign private issuer regimes ease listing requirements and encourage funding of small businesses, providing strategic advantages to foreign tech companies choosing to list in the US[3].
Some companies that have switched from UK to US listings, such as Wise and ARM, have cited the pursuit of higher valuations and lower cost of capital as reasons for their move[1][2]. While the LSE offers lower IPO fees and a more geographically diverse investor base, many tech companies prioritize access to US institutional investors and deeper liquidity[1].
Examples of successful US listings include European-born tech firms like ARM, Wise, Flutter, and UiPath, who have chosen US exchanges for strategic reasons to be valued alongside global peers[3]. However, it's important to note that some large firms, like Glencore, have chosen to remain on the LSE due to a perceived lack of value accretion from moving to US exchanges[2].
The shift of companies like Wise and ARM to the US could have implications for growth-stage venture capitalists in the UK, making it harder for them to invest in UK scaleups without a clear US exit plan. This trend also raises concerns about a potential drain of capital and talent from the UK[4].
The topic of Europe's startup struggles and the appeal of US markets will be a hot topic at an upcoming conference taking place on June 19-20 in Amsterdam[5]. Sean Reddington, co-founder of UK tech firm Thrive, has called for urgent government action to provide meaningful incentives for tech firms to list in the UK[6].
The US economy performs better than the EU, resulting in higher valuations for companies listing in New York. This, along with the attractive features of the US markets, makes the NYSE a formidable competitor in the global tech IPO landscape[7].
References:
- The Financial Times
- The Economist
- TechCrunch
- City A.M.
- Amsterdam Tech Week
- City A.M.
- The Telegraph
- In light of the deeper pool of capital and stronger post-IPO support offered by US markets, many high-growth technology firms are opting to list on the New York Stock Exchange (NYSE) rather than the London Stock Exchange (LSE), drawing from the vast institutional investor base in the US.
- The US regulatory environment, which includes favorable frameworks like the JOBS Act and foreign private issuer regimes, offers strategic advantages to tech companies, making the NYSE a preferred choice for a growing number of European tech startups seeking higher valuations and lower cost of capital.
