RUTH SUNDERLAND: Where Arm chooses to float will set tone for tech – the choice it makes could turn into a self-fulfilling prophecy for UK markets
- If Arm lists in the City, it will act as a magnet for others
- Reject London and others will do the same
- Fiction to say that London is a second-rate market for tech
- Government wants tech firms to be quoted here
For a supposedly hard-headed environment, the financial world provides extraordinarily fertile ground for myth-making.
The most pernicious current falsehood is that the London market cannot handle big tech floats and that any founder worth their salt will opt for Nasdaq in the US instead.
The arguments have coalesced around chip designer Arm, the UK’s flagship tech company. Founded in Cambridge, Arm shares were quoted in London until its 2016 sale to Japanese financial conglomerate SoftBank, whose boss Masayoshi Son now wants to float on the Nasdaq.
Chips are down: If Arm lists in the City it will act as a magnet for others, but if it rejects London, others will do the same
If he goes ahead, it will be a grave setback for the Government’s plans for a vibrant tech sector. Son’s proposal is an insult. The City is not a primitive backwater, but a premier global financial centre.
Pharma group GSK certainly has no qualms about listing its consumer healthcare business, likely to be valued at £40billion plus, on the London market.
Another big beast, Royal Dutch Shell, at the start of this year scrapped its UK-Netherlands dual arrangement and now has a single structure with all shares under British law. The fact these global giants favour London tells us there is no intrinsic reason for Arm to give Britain the cold shoulder.
Worth noting, too, that Sage, a software spinout from Newcastle University, attracts big US investors despite being based in the North East and quoted in London.
The Government wants tech firms to be quoted here. A major charm offensive is under way with Starling Bank, which is lining up a float over the next couple of years. Ministers and officials are courting the founder Anne Boden, who has far more incentive than Son to float here, given that she and most of her customers are British. An IPO on Nasdaq would look out of keeping with Starling’s image.
When it comes to Arm, they should push out the boats to secure a London listing.
City grandee Ken Costa has the right idea: he wants Boris to lead a taskforce from the City to convince Arm’s owners. As he points out, the UK Infrastructure Bank could act as a cornerstone investor.
The myth that the London market is a poor home for tech is one of a number of absurd theories parroted over the years.
Many of us remember the ridiculous notion that Reykjavik was one of the epicentres of global banking. Everyone seemed to believe it, even though a brief visit there would have exposed the implausibility.
And it is not so long ago that international banks Standard Chartered and HSBC dropped heavy hints that they were minded to leave London for Hong Kong, to escape high taxes and beastly regulation.
A moment’s thought would have raised doubts as to whether these lenders, even before the Hong Kong protests, would really prefer the whip of Chinese communism to free capitalist democracy in the UK.
Like those earlier myths, the fiction that London is a second-rate market for tech, has more than a whiff of self-interested propaganda – in this case from founders who would like to see the UK relax listing rules they find irksome.
Entrepreneurs such as Matt Moulding of THG may complain about markets here, but whether his take on governance would be better received in the US is open to doubt.
It may seem an arcane debate, but where Arm chooses to float will set the tone for tech. Whichever choice it makes could turn into a self-fulfilling prophecy for the UK markets: list in the City, and it will act as a magnet for others; reject London and others will do the same.