Tech Firms Avoid London Stock Exchange: Here’s Why
▼ Summary
– Wise is shifting its primary listing from London to New York, joining other firms like Arm and Just Eat Takeaway in leaving the London Stock Exchange.
– Companies prefer New York listings due to higher valuations, deeper capital pools, and greater investor appetite for risk compared to European markets.
– The NYSE’s $27 trillion market cap dwarfs the LSE’s $3.5 trillion, attracting firms like Arm and Wise seeking larger investor bases and liquidity.
– US investors are more willing to back growth-stage tech firms with revenue-before-profit strategies, unlike risk-averse European investors.
– Experts warn Wise’s move could worsen Europe’s “brain drain” of capital and talent, urging government incentives to retain tech listings.
The London Stock Exchange is losing its appeal among tech companies, with an increasing number opting to list in New York instead. High-profile firms like Wise, Arm, and Just Eat Takeaway have recently shifted their primary listings away from London, drawn by the promise of higher valuations, greater liquidity, and a more favorable investment climate in the U.S.
American markets offer significantly larger pools of capital, with the NYSE’s staggering $27 trillion market cap dwarfing London’s $3.5 trillion. This disparity makes the U.S. an obvious choice for companies seeking maximum exposure and investor interest. Kristo Käärmann, CEO of Wise, emphasized that the move allows access to the world’s most liquid capital markets, crucial for scaling operations globally.
Investor mentality also plays a key role. U.S. markets are more receptive to high-growth tech firms, even those prioritizing expansion over immediate profitability. “American investors grasp the ‘revenue-before-profit’ mindset,” explains Andrey Korchak, a UK-based entrepreneur. “In Europe, there’s often pressure to demonstrate earnings from the outset.” This conservative approach can stifle innovation, pushing ambitious startups toward more risk-tolerant markets.
The trend raises concerns about a potential brain drain from Europe’s tech ecosystem. Sean Reddington, co-founder of Thrive, warns that without strong incentives to stay, the UK risks losing both capital and talent. “If domestic IPOs don’t deliver competitive rewards, companies will increasingly look abroad,” he says. He urges policymakers to introduce measures that make London a more attractive listing destination.
The debate over Europe’s startup challenges will take center stage at the upcoming TNW Conference in Amsterdam, where industry leaders will discuss strategies to revitalize the region’s tech investment landscape. For now, the exodus to U.S. markets shows no signs of slowing, leaving European exchanges scrambling to retain their most promising firms.
(Source: The Next Web)
