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London Stock Exchange: UK firms can raise more money here than overseas

Sam Shead | Jan. 13, 2014
Recent IPOs suggest London is still losing out to New York as a listing destination.

The London Stock Exchange (LSE) saw a record number of tech IPOs in 2013 with 36 companies raising over a £1 billion.

And this year is set to be just as successful, according to Marcus Stuttard who heads up the UK Primary Markets and the Alternative Investment Market (AIM) at the 213-year-old exchange, which sits on Paternoster Square in the City of London.

"We would expect the sorts of volumes that we have seen over the last 18 months to continue," he told Techworld this week. "Our forward look at the pipeline shows that it remains strong and I'm aware of companies [that plan to list] on both AIM and the main market so I'm very confident."

However, the age-old question of whether London's markets can compete with New York's Nasdaq and the NYSE remains, with some experts claiming that tech firms can raise a staggering 300-500 percent more capital when they list on the other side of the Atlantic.

"I disagree with that as a generalisation," said Stuttard, adding that there have been a number of recent tech floats in London that have been over-subscribed due to an overwhelming amount of investor support.

Where's the money?
One of the reasons why some companies believe they can raise more money on US markets is because the nation is home to venture capitalists (VCs) with significantly deeper pockets than the VCs in the UK and Europe. Indeed, Huddle CEO Alastair Mitchell was recently quoted saying: "There is one building on Sand Hill Road [in California's Silicon Valley] where there are four VCs, and they control more money in their funds than all of the VCs in London do."

Meanwhile, Lars McBride, chairman of pan-European engineering firm Calder Group said at a start-up event in London last month that "funding in large amounts in the UK is still not plentiful.

"If you want more than £5 million in equity there aren't that many places to go for it," he said. "We don't have the benefit of large US market which has enabled funds to reach critical mass and the funds can become more specialist."

McBride suggested that Europe-wide venture capital funds should be established if UK companies are to get access to a similar funding pool to American start-ups.

But Stuttard claims there are a number of "very active" VCs and private equity houses in the UK and Europe, adding that many US investors back companies listing on UK markets anyway.

"I simply don't accept that there is more capital available elsewhere for UK tech businesses," he said. "The other thing is we don't just look at investors on London and US markets as one homogenous block of investors. Clearly, the US is a bigger market on aggregate, but a lot of those US investors are essentially US-domestic investors. We've repeatedly seen international businesses go to the US and end up essentially having to become US businesses in order to stay there."

 

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