Arm Holdings: west side story
On the same day SoftBank revealed plans to refloat UK chip designer Arm Holdings, the London Stock Exchange touched an ignominious milestone: every one of its biggest capital raises from the past six years was underwater.
At Tuesday’s market open, private equity group Bridgepoint dropped momentarily below the issue price on its July flotation. The brief reversal meant that, according to Bloomberg data, the last nine LSE companies whose gross proceeds from IPO totalled at least £750mn were all in negative territory: from Dr Martens (down 23 per cent from its issue price) to retailer THG (down 73 per cent) and Aston Martin (down 91 per cent). To find a success it was necessary to cast back to the 2015 debuts of Auto Trader (up 178 per cent) and Worldpay (taken over at about a 60 per cent premium in 2019).
Lowering the bar to a minimum total raise of £500mn improved the picture only slightly. Of the 20 LSE floats since 2015 fitting that criterion, only Oxford Nanopore (up 21 per cent) and Airtel Africa (up 77 per cent) were trading above their float prices.
London’s apparent indigestion around big capital raises is a problem for the investors and political lobbyists trying to convince SoftBank to favour LSE over Nasdaq. To be given a premium LSE quote and a spot in the FTSE UK indices, Arm would need to float at least 10 per cent of its share capital. That suggests a total initial capital raise of approximately £3bn. LSE has not been the primary venue for a float placing of that size since Standard Life in 2006.
A senior adviser to Arm in the years before its 2016 takeover by SoftBank told City Insider that, given relatively shallow capital pools available locally and historic caution among UK investors around tech valuations, it was highly doubtful that even a London dual listing would be worth the trouble.
BATM: benchmark slight
Zvi Marom, one of the London market’s longest-serving chief executives, has more reason than most to doubt UK claims of friendliness and flexibility around technology listings.
Marom floated BATM Advanced Communications on the LSE in 1996, rode the Israeli-based network and medical equipment maker to a £3bn valuation at the peak of the dotcom bubble in 2000 and within three years gave back 99 per cent of it. Before and since, his company has been a fixture in FTSE’s UK All-Share and Techmark indices.
That was until last February, when index setter FTSE Russell said it was reclassifying BATM from British to Israeli because too many shares had been traded in Tel Aviv, its dual-listing venue. The company wanted to remain in the FTSE UK index series so was given a year to find a workaround.
Plans under consideration were said to include a break-up and multinational relistings that would need shareholder and regulatory approvals. So in January, with the deadline looming, BATM told investors it was requesting an extra 15 months to finish the job. City Insider hears that BATM’s public statement was made at FTSE’s request — even though FTSE’s rule book offers no provision for extensions.
A nationality review published last week confirmed that time had run out, rules were rules, and BATM would be redomiciled. The stock will continue to trade on LSE’s premium segment but from March it will no longer be UK-indexed. Company insiders saw no chance of a reprieve and have been looking to New York, which has no similar issues with dual-listed stocks. Shore Capital, BATM’s broker, has begun an audit of the shares currently held by tracker funds that will need to find new homes.
Marom said he was “puzzled” by the decision. “A lack of pragmatism and blindness to the possibility of market disruption is fast becoming a deterrence for good foreign-domiciled companies to list on the LSE,” he explained, “especially when other bourses do not have such draconian rules.”
