Tech firms neglected London Stock Exchange listings preference

In the rapidly evolving world of fintech, the decisions of tech companies like Spotify and Wise to list in New York instead of the London Stock Exchange (LSE) have raised concerns about a concerning trend. The move is primarily driven by greater access to larger and more liquid capital markets, higher investor demand, and a more favorable regulatory and financial ecosystem for tech growth firms in the U.S.

Spotify, a fellow Stockholm-based tech darling, listed on the NYSE in 2018. More recently, UK chip designer Arm opted for a New York IPO in 2023. The trend threatens a 'brain drain' of capital and talent from the UK, as food delivery giant Just Eat Takeaway quit the LSE for Amsterdam in November.

New York offers advantages such as deeper pools of tech-focused investors, a stronger culture of nurturing innovative companies with high growth potential, and more established frameworks for technology-related IPOs. The US economy performs better than the EU, and valuations are higher for companies that list there, according to Victor Basta, managing partner at Artis Partners.

One key reason for this preference is the larger and more liquid capital markets in the U.S. The NYSE and NASDAQ, for instance, have a combined market cap of around $27 trillion, compared to just $3.5 trillion for the LSE. US investors are known for taking bigger bets on growth-stage tech companies, contributing to a higher density of tech unicorns in the U.S. compared to Europe.

Another factor is the regulatory environment. While the U.S. regulatory framework is rigorous, it is often seen as more conducive to scaling tech firms compared to the evolving and often stricter regulatory landscape in Europe, exemplified by initiatives like the Digital Markets Act, which aim to curb the power of digital platforms and can introduce uncertainty for tech businesses.

The investor sophistication and appetite in the U.S. also play a significant role. U.S. investors traditionally have a strong focus on growth sectors, including technology, and are more accustomed to valuing disruptive tech companies that may not yet be profitable but have high user growth and market potential. In contrast, European investors can be more conservative or focused on profitability in the near term.

The move by British fintech Wise to shift its primary listing from the LSE to the New York Stock Exchange (NYSE) is a prime example of this trend. Wise's CEO, Kristo Käärmann, stated that the move allows better access to the world's deepest and most liquid capital market.

The topic of Europe's startup struggles, including the trend of tech companies listing overseas, will be discussed at the our website Conference in Amsterdam on June 19-20. Sean Reddington, co-founder of UK tech firm Thrive, has called for urgent government action to address these issues and keep the UK competitive in the global fintech arena.

In summary, the larger, more liquid tech-friendly markets, combined with strong investor demand and a supportive regulatory and financial ecosystem, provide clear advantages to tech companies like Spotify and Wise over European exchanges such as London. The UK government is being urged to provide "meaningful incentives" for tech firms to list in the UK to counter this trend and prevent a potential 'brain drain' of capital and talent.

[1] https://www.ft.com/content/c69a44a6-d651-408d-9d64-e22f9f026d23 [2] https://www.ft.com/content/392f820a-e334-4f9a-9258-a2e03c75e686 [3] https://www.ft.com/content/36a7e91e-678a-4e2c-b65f-8e528a61f53c [4] https://www.ft.com/content/e1508c90-781c-48e2-a98e-471147d5d628

The trend of tech companies choosing to list on foreign exchanges, such as Spotify and Wise listing on the New York Stock Exchange, is alarmingly indicative of a potential 'brain drain' of capital and talent from the UK.
The larger and more liquid capital markets, investor sophistication, and favorable regulatory and financial ecosystem in the U.S. provide a significant advantage for tech companies like Spotify and Wise, compelling them to list on American exchanges over European ones.