To float, or not to float?

To float, or not to float?

The UK is trying to make itself more attractive to big tech listings but how do we do that when the US is clearly just a better place to do it?

Within the last couple of weeks, 2 large UK tech companies have floated, one in the US and one in the UK, and this is what happened:

Electric vehicle company Arrival has staged what is believe to be the biggest ever stock market listing for a UK tech company. The deal with a US SPAC means Arrival is now listed on the Nasdaq in New York at a value of roughly $13bn (£9.5bn) on the day of listing, far more than they had ever hoped for.

In contrast, Deliveroo opened yesterday morning for their London debut and the shares plummeted 30% almost instantly. The company had set its opening share price towards the bottom of its target range at 390p on Tuesday. They were keen to list in the UK because this is where they’re from and they felt a sense of loyalty. That was an expensive mistake.

So, what was the real difference? Other than the US’s insatiable appetite for investing in tech, it is the fact that SPACs are not eligible for listing in the UK but they are in the US. Once again, we are behind the curve and we need this to change.

Britain has missed out on the record wave of SPAC listings that have taken place globally, particularly in the United States, where 522 such listings have raised over $300 billion in 2020 and 2021 so far.

There have only been 10 SPAC listings in Europe in this same time frame, with a total value of about $1.3 billion, and none in London, where the rules are perceived as off-putting. European SPACs have so far chosen to list in Amsterdam or Paris. In a post Brexit Britain, this isn’t acceptable.

As part of a wider drive to attract more tech companies to the London Stock Exchange, a recent review of listing rules by former EU Commissioner Jonathan Hill recommended bringing rules in the UK closer in line to the United States on SPACs.

Firstly, for those who aren’t familiar with SPACs, let me explain what they are:

• SPAC stands for Special Purpose Acquisition Company. They are also known as “blank cheque companies.”
• They are essentially empty cash shells — companies with no operations that are created simply to hold investor money and then spend it. Management try to identify a company or assets to buy, thus giving the SPAC stake inherent value.
• They typically target deals to take private companies public. The benefit for companies that get acquired is it can be a quicker and easier way of listing on the stock market.

The Financial Conduct Authority said it will consider introducing a minimum market capitalisation and a redemption option for investors as the UK tries to attract some of these "blank cheque" companies to list in London.

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