Last month, Twitter announced (in an appropriately brief fashion), that it had begun preparations for an IPO in the US. According to The Street, it plans to become a public company by selling 50-55 million shares at a price of around $28 to $30 per share, to reach an estimated total value of $1.5 billion.
It could only get better…
Although it has not yet announced which US exchange will host the listing, this is a vote of confidence in the US equity market as a whole, which has suffered a crisis of confidence following Facebook’s disastrous performance on the Nasdaq earlier in the year.
Facebook’s gradual recovery from $17 to its current $45 a share will have helped, as will other recent ECM success stories, such as LinkedIn’s $1.2bn secondary share offering, which was heavily oversubscribed and valued the company at over 730x earnings.
Asia is less flexible
The US also scored a coup over Asian markets in the tech sphere following the recent news that Alibaba, the huge Chinese online retailer, has shunned Hong Kong and plans to list on a US exchange. Commentators cite the dual share class system permitted on US exchanges as particularly attractive for founders and management that want to retain greater control of the company. Whether it is attractive for investors is a separate question.
London is smaller
Unfortunately, US dominance in the tech space also occurs at the expense of London. British born tech companies that are or are rumoured to be planning an IPO in the US include King.com, the games developer behind Candy Crush Saga, Markit, the economic survey data provider, and Shazam, the music application company.
But the London Stock Exchange is not taking this lying down and in March 2013 launched a new High Growth segment with a free-float requirement closer to NASDAQ’s 10 percent.
In addition, the AIM market is seen as a more flexible regulatory system for smaller companies. A recent market report suggested that a number of smaller US firms are choosing to list in London, particularly on AIM, because they are attracted by a higher profile on a smaller market. However, the fact remains that since 2010, no European technology company has launched an initial public offer on the London Stock Exchange’s main market.
- The higher concentration of tech investors and sophisticated tech analysts in the US draws in IPOs from across the globe.
- Flexibility is key – there is a growing trend to seek smaller free-floats and retain greater voting rights for management.
- London is better positioned at the smaller end of the scale, where the less-regulated AIM market is attracting technology companies that do not want to be lost amongst the larger tech groups.