London rides a tech wave
THE Deliveroo float punctured London’s reputation as a great place for an initial public offering (IPO), but it has failed to sink the Square Mile. Encouraged by the London Stock Exchange, Lord Hill’s review into technology initial public offerings and Chancellor Rishi Sunak’s enthusiasm for British unicorns (tech companies with a valuation of £1bn or more), this is a year when one expects the floats will continue to arrive.
It is helpful that London share indexes, which floundered under the weight of Brexit, have come roaring back. In Friday trading the FTSE 100 index climbed back above its pre-pandemic level of 7000 and it has now gained 4.5pc in the last three months. The latest surge was largely a reaction to global events, notably the stonking 18.3pc first quarter output recovery in China, which drove up natural resource stocks in the City, along with buoyant financial results from the US banks which gave some encouragement to the Britain’s finance laggards.
Of more relevance perhaps to IPOs has been the soaring FTSE 250 of UK-focused shares, which have outpaced markets elsewhere by climbing 26pc over the last six months as Brexit moved into the rear-view mirror. It makes one wonder how many good, solid UK companies could have been saved from being swallowed on the cheap by private equity ghouls had the UK’s fussy big battalion investors been a little less impatient for immediate cash payouts.
The Deliveroo flop has been an embarrassment, and founder Will Shu and advisers clearly were over-ambitious in pitching for a value of £7bn plus. Nevertheless, when one looks at the bonkers £64bn valuation put on crypto- currency trading platform Coinbase, nothing looks overpriced.
What is clear is that there is an arrogance within the Deliveroo hierarchy. Instead of engaging with long fund, institutional shareholder critics before the float, the company’s internal communications team headed by Thea Rogers, with little direct experience of engaging with outside investors, circled the wagons. Deliveroo should have directly addressed the employment conditions of riders but chose to issue a rambling press releases on how satisfied 90pc of the workers were while the rest were creating pandemonium.
It was particularly jarring because the London IPO was seen as a confidence booster when those talking down the City were pointing to the migration of euro denominated shares to Amsterdam.
The underlying data for equity raisings is actually positive. In the first quarter there were no less than 25 IPO’s across the main market and AIM, the highest quarterly total since 2006. Some £15.9bn was raised through floats the best figure since £26bn in 2009. Meanwhile, the valuation of The Hut Group, which came to the market in the final quarter of 2020, has flourished in spite of continuing questions about voting rights and governance.
London’s fintech leadership means the pipeline is far from dry. Pensionbee’s £384m issue is being readied. The payments firm Wise is exploring a direct listing in which traditional underwriting is eschewed, which could potentially place a value of £7bn for the group. This would be the first such direct listing, without any new fundraising, since Old Mutual launched in 1999. It is terrific that in spite of Deliveroo and the questions raised about the Mike Lynch connection at cyber- security firm Darktrace, London is still seen as attractive. There will be escapees. Nick Jones of Soho House is attracted by the bright lights of Manhattan for his public offering in spite of the deep central London roots of his hospitality enterprise.
One cannot fault the ambition but it is a disappointing decision given the global reach of so many FTSE companies.
Circuit breakers
ACROSS Europe, hedge funds that short shares and play a role in disorderly markets are disparaged.
They have even been described by senior politicians as locusts. So I love the idea that David Einhorn, who runs Greenlight Capital, is complaining that Wall Street regulators have failed to do anything to control the ‘quasi-anarchy’ engendered by the Gamestop share odyssey, the ‘free’ Robin Hood dealing platform and Reddit subversion.
It makes one think that City firms and financiers and regulators at the Financial Conduct Authority and Bank of England should have raised red flags much earlier about the helter-skelter growth of invoice financing group Greensill Capital. The nation might have been spared the stench of corruption and seven (at last count) separate probes.