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If you were a UK tech business looking to IPO, where would you go?

Jump ahead to the company spotlights where we explore the IPO journey of PensionBee, Endava, Moongpig and Vaccitech
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When it comes to achieving an exit, fast-growth UK technology companies have many options to choose from. Some may choose private equity, others a trade sale to a competitor. For many tech entrepreneurs, however, listing on the stock exchange is an effective way to realise value and drive future growth.

If you want to tap into a vast pool of capital, retain a level of autonomy, and benefit from the attention that comes with being a publicly listed company, an IPO becomes very attractive. But once you have chosen this path, there are further questions to be answered. Crucial amongst these is: where?

In this article, we will draw upon the experiences of four leaders from listed UK-based tech companies to find out how they decided on their listing location – and why. These include: Romi Savova, Founder of tech disruptor PensionBee, which allows customers to combine several old workplace pensions into one online pot; Mark Thurston, Chief Financial Officer at Endava, which helps companies with their digital transformation; Andy MacKinnon, Chief Financial Officer at Moonpig, a technology platform for sending cards and gifts; and Georgy Egorov, Chief Financial Officer of Vaccitech, a co-inventor of the Oxford AstraZeneca COVID vaccine. These interviews took place in March 2022, prior to the recent fall in tech stock prices and global equities more broadly. The topics addressed in this article continue to be particularly relevant as tech businesses adapt to the changing market environment and investor priorities. 

The UK tech scene 

The UK is home to a vibrant and innovative technology industry, as evidenced by 25 years of incredible growth stories in the Deloitte Technology Fast 50, which is one of the UK's foremost technology awards programmes. Fintech has long been seen as the jewel in the crown, but other sectors have gained traction in recent years too, including e-commerce, digital health, and food delivery.

Fintech has long been seen as the jewel in the crown, but other sectors have gained traction in recent years too, including e-commerce, digital health, and food delivery.

In our 2021 Technology Fast 50 report, we found that the UK is home to an extraordinary wealth of tech companies, benefiting from a crucible of growth drivers. Tech firms are leveraging data in fascinating ways to plot their growth strategies. They are harnessing top talent from across the whole of the UK to drive growth and innovation. They are also investing heavily in R&D: the Fast 50 last year invested over three times more on R&D as a percentage of revenue, compared to the S&P 500. But while there is little doubt that the UK is a strong contender in the global tech community, it does not rank as the prime listing venue for technology companies.

The headline figures may appear promising. Tech IPOs on the London Stock Exchange raised a record £6.6bn in 2021 – more than twice the figure from 2020. However, this is one seventh of the $69.3bn (£47bn) raised by tech IPOs in the US’ NASDAQ and New York Stock Exchange in the same year.

Indeed, new listings on the London Stock Exchange represented just 5% of global IPOs between 2015 and 2020. In 2021, the UK accounted for 126 out of 2682 global IPOs, or 4.7%.

Is this cause for concern? First, let’s review how the UK performs against the rest of the world in terms of gross domestic product (GDP). Given that the nation represents between 2.5% and 3% of global GDP, based on current estimates, its share of IPOs would appear greater than its economic clout. Yet the UK’s performance is muted when compared to the US, which generates 16% of global GDP yet claimed around 40% of global IPOs.


It all comes down to the UK or US

Savova floated PensionBee on the London Stock Exchange in April last year. She says that for her – and many other UK technology leaders – the decision on where to list was simple: the US or the UK. “London is competing against the US, that’s the rival,” says Savova. “In conversations about where to IPO, UK firms rarely consider Frankfurt or other countries,” she says. “It’s always between the UK and US.”

This is because, for many UK-based firms, the size of the US market is a major draw. Mark Thurston floated Endava on the New York Stock Exchange in 2018. “I did wonder about listing in London,” he says. “The bar is lower, we would be a bigger fish in a smaller pool, and there’s no quarterly reporting and Sarbanes-Oxley to consider but the founder, John Cotterell, had his sights set firmly on the US as that’s where the major growth will come from.”

For Moonpig’s MacKinnon, however, the UK was a natural listing venue: it’s where the majority of Moonpig’s customers live, as well as the majority of employees who are based in the London Head Office. “While we have a sister brand in the Netherlands, which represents around a third of our business, we have always considered ourselves to be a British business with the consumer model being well understood here in the UK, so the FTSE was a natural place for us to be.”

“Since listing, we have seen an increase in profile as a London listed business,” he continues. “We used to get maybe two press articles a year and we would drive a small amount of consumer PR ourselves but now we can feature in dozens of articles a week. We also find that we receive good coverage by research analysts so in terms of profile, it has been a real positive.”

Every technology firm is different and has differing needs when it comes to IPO location. Thurston believes that, generally, those bringing a brand-new technology proposition to market will usually prefer the US. “The London Stock Exchange is like Jurassic Park,” he explains. “All dinosaurs and no new technology companies. Investors don’t really understand new tech in the UK. If you have a brand-new product or slant, it can be hard to get traction.”

However, the decision may not remain a binary one for much longer. Other stock exchanges are now vying for tomorrow’s tech and innovating to attract for listings. The Dubai exchanges recently saw huge gains, as has Singapore, Hong Kong and, in Europe, Amsterdam and Frankfurt. Of the 10 biggest tech IPOs in Europe last year, two listed in Frankfurt, two in Amsterdam and the balance on the LSE and Nasdaq.


Are valuations a key factor?

We often hear that investors’ pockets are deeper in the US – and that valuations can be much higher as a result. This is why many talented British tech entrepreneurs prefer to move to the US to grow their ventures. “When I’m out in Boston, attending biotech events, I hear a lot of British accents,” says Vaccitech’s Egorov. “It’s very clear that these tech entrepreneurs are moving to the US to commercialise their ideas.”

However, many consider valuation disparity between the public markets of the UK and the US to be a myth. Large institutional investors are market agnostic when it comes to valuing a company and they benchmark against a global peer group, using similar bases to value a business. This is especially relevant for tech companies, which tend to be global in scope.

If valuations remain consistent across different bourses, the next consideration is the availability of a peer group. Listing on a stock exchange where there are comparable businesses means that the analysts and commentators in that territory are likely to understand you and your metrics of success. This creates industry clusters on different exchanges: 98% of the US’ listed biotech companies are on the Nasdaq, for example.

A few years ago, it would have been unheard of for a biotech business to list in London. “The view was that you had to go to the US for a sensible biotech valuation, as there weren’t any comparables on the LSE.” Vaccitech’s Egorov says: “If you look at the S&P 500, after technology, healthcare is the largest constituent,” says Egorov. This is why the 2021 IPO of Oxford Nanopore was viewed as a gamechanger for London. It will now provide a strong peer to future UK biotech listings.


"UK investors are believed to have a myopic focus on dividends, whereas US investors are more comfortable with forgoing short-term gains for long-term value."

Significant differences between the US and the UK

Investment strategies and appetites seem to vary between the UK and the US. UK investors are believed to have a myopic focus on dividends, whereas US investors are more comfortable with forgoing short-term gains for long-term value.

Savova warns that investor attitudes are holding back the UK. “UK investors have been overly focused on slow-growth, dividend-paying companies,” she says. “Companies pay dividends when they have nothing better to do with the capital. They don’t see opportunities for growth, which is why they return money to shareholders. When the market rewards that behaviour and creates this self-reinforcing cycle, it is detrimental both to the companies and the UK.”

Moonpig’s MacKinnon echoes this sentiment, however he believes it is possible for UK listed firms to offer investors both profit and growth. “The level of emphasis that investors place on growth in the US is different,” he says. “In the UK, there is generally a greater focus on profitability. We have found a balance. In our current guidance, we target a flat percentage profit margin and, everything above that figure we reinvest to underpin and drive revenue growth.”

There are also very few loss-making companies on the LSE. Highly innovative companies that are creating a new market, rather than competing with existing players, are more likely to be loss-making, so the dearth of these high-risk companies is notable. In the US, investors are used to the likes of Uber and Spotify and the Nasdaq is seen as the place to invest in high growth, high risk, high volatility companies.

What next?

Higher valuations in the US are a myth. UK investors can be too risk averse. The size and scale of the US market will make a US listing very attractive. This is the state of play, according to these technology leaders. The UK can be a great place for tech businesses to IPO but it could be better. How can we make the UK more attractive? In the next ‘Future of the UK tech sector’ article we explore this issue in detail and suggest ways to increase the UK’s competitiveness in the battle for the tech IPO. 

Company spotlights 

Endava’s IPO journey

“The London Stock Exchange is behind the times,” says Endava Chief Financial Officer Mark Thurston. “It’s mainly traditional industries and there is very little new technology companies. Investors don’t really understand new tech in the UK. If you have a brand-new product or slant, it can be hard to get traction.”

Thurston joined the technology services company in 2015 to help the London-based company list in New York. “I didn’t have IPO experience, but I had been CFO of a New York listed business and I understood how to set up a finance function to go public.” Endava works with blue chips companies, globally, helping them to move to next-generation technologies.

Endava founder John Cotterell wanted to list in New York, not just because of its technology focus but also because of the dual class voting structure. “John founded the company in 2000 and bootstrapped the business all the way through to the IPO, taking no private equity or external investment,” explains Thurston. “There was a perception that UK technology companies tend to be taken over by Americans, and John wanted to maintain control the business through super voting rights.” Endava also chose to list just 15% of its market cap, and the $146m transaction caused some controversy because of the limited number of shares on offer. “The Americans said, ‘Do a proper IPO!’” recalls Thurston. “When you IPO, your shares go out at a discount so the people who own the stock don’t want to put it all up at once but bleed it out over time.”

Endava listed on the New York Stock Exchange (NYSE) in July 2018. It was the more attractive of the two American exchanges because Endava’s biggest competitors were also listed there.

It took three years to reach IPO. “We knew what we wanted to do in 2015 but the process took much longer than anyone thought,” says Thurston. “The schmoozing takes a long time – meeting banks, potential investors, lawyers, and accountants. You want everyone you work with to have the best interests of the company at heart, so we did a lot of sounding out of advisers.” Thurston spent a lot of time with bankers and analysts explaining the Endava proposition. “The old saying goes that you date your banker and marry your analyst, so you want them to understand the story, which is a long process.” Endava’s management team was very picky about the type of investors it wanted on board. “We wanted mainly long only shareholders, who would be us for a long time.” explains Thurston.

Part of the desire to list in the US is down to Endava’s strategic plan to expand its reach across the country. Right now, 43% of revenues come from the UK, and 33% from North America, but this balance is shifting. “The US is a huge market with lots of potential,” says Thurston. “Lots of UK companies have come to grief in the US but we are growing, both organically and through M&A.”

According to Thurston, the US will continue to attract UK technology firms. “The NYSE and Nasdaq have been successful because they back founder-led businesses. There’s a difference in approach. The UK is hung up on the governance piece while the Americans have the view that this founder has been successful, so I’m going to back him and ride his coattails.” The UK has begun changing certain rules, such as relaxing free float and introducing dual class shares, to mirror the US system. “That will help,” says Thurston. “But then when you look at the size of the wallets of US investors, it’s hard to compete. We could have raised all the money we wanted from the east coast alone, and never even looked at California.”

Thurston believes that the US will retain its crown when it comes to tech IPOs but that the UK could also be a significant market. “I don’t think that anywhere else in Europe matches London. London could make itself a lot more attractive to European companies.”

Why stay headquartered in London? It’s a personal choice, according to Thurston. “John is a Brit,” he explains. “And he set up in London and this is where he started the business. But that doesn’t stop us focusing on the US as that’s where the major growth will come from.” 

Moonpig’s IPO journey

When Moonpig listed on the London Stock Exchange in February 2021, it heralded a wave of technology initial public offering (IPOs). According to the LSE, tech businesses accounted for nearly 40% of total IPO proceeds last year. Moonpig’s debut was seen as a runaway success by capital markets pundits, with shares jumping 25% on opening day. Yet just a year earlier, an IPO had seemed much further in the distance.

“As a high-growth business, an IPO was always on our radar, but timing was essential to make sure we had reached sufficient size to successfully access the public markets,” reveals Chief Financial Officer Andy MacKinnon. The COVID-19 pandemic and ensuing lockdowns changed the game for Moonpig and accelerated the company’s growth. Customer numbers and revenues jumped as people flocked to the online greeting card and gift platform to reach out to loved ones. “The step change in scale meant we gained critical mass,” says MacKinnon. “By the summer of 2020, this opened up public markets as an alternative to a secondary private equity transaction.” This was a real boon for the business: Moonpig’s valuation on IPO outstripped that of private equity transactions at the time, but there was one key challenge to overcome: “We’re a technology platform and had to educate people about our business model,” explains MacKinnon. “We had to ensure that the market understood the defensibility of our business and the resilience of our revenue over the long term.”

IPOs are a cyclical phenomenon, typically slowing down during the summer and over Christmas to then reach fever pitch in the spring and autumn. “We ran at it as hard as we could,” says MacKinnon. “But it was complex. We were part of a wider business, so we had to undertake a complicated legal demerger and refinancing before we could IPO.” There were also changes to internal processes: “We had already strengthened the governance foundations of the business with a view to exit but the requirements for an IPO are more onerous than private ownership.” Moonpig also opted to become a Premium Listed Company, which required that it pursue the highest levels of regulatory compliance.

The benefits of being a UK listed company were multiple, according to MacKinnon. “Market valuations were attractive and there are benefits to being listed in the same country as our primary consumer market,” he explains. “We saw an increase in profile as a locally listed business. We used to get maybe two press articles a year and we would drive a small amount of consumer PR ourselves, but now we feature in dozens of articles a week in high-impact media outlets. We also find that we receive good coverage by research analysts, so in terms of profile, it has been a real positive.” Do UK consumers prefer buying from a UK listed business? “I doubt that’s part of the thought process when you’re buying a greeting card and gift,” says MacKinnon.

Being a listed business can be challenging, he admits. “We have an entrepreneurial, agile culture and we’ve worked hard to ensure that this hasn’t been stifled by becoming a plc. We have had to flex the ways that we talk to the wider business about financial performance, because you can’t share inside information, but it is manageable. No one hands you a manual when you IPO, you just have to work through it.”

Moonpig has built up a track record of beating and then raising its guidance to the market. “We were transparent about the impact of Covid ahead of the IPO,” he explains. “We didn’t extrapolate a growth line up from the peak of lockdown. We quantified the normalisation that we expected and came to market saying, ‘We are on the crest of a wave, but it will be lower next year,’ while also pointing to the long-term growth drivers of the business

MacKinnon added, “Moonpig has delivered a permanent step change in scale over the past two years, with a larger customer base displaying higher loyalty than pre-pandemic. The long-term opportunity remains vast, and we have never been in a better position to deliver against our strategy to become the ultimate gifting companion." 

PensionBee’s IPO journey

When Romi Savova founded PensionBee in 2014, her goal from day one was an initial public offering (IPO). PensionBee is a pension provider with a difference, allowing customers to easily combine multiple pensions into one online pot. Savova, who worked in investment banking, risk management and financial technology at the likes of Morgan Stanley and Goldman Sachs, created the venture after struggling to understand the opaque and complex world of pensions herself.

In the world of financial services, where trust and visibility are vital, Savova wanted PensionBee to have the strong governance and credibility associated with being a listed business. “We always knew we would list. The question wasn’t ‘if’ but ‘when’,” she says.

PensionBee is firmly focused on the UK market so the London Stock Exchange was a natural home for the technology firm. Savova never considered rival bourses such as the Nasdaq, despite the perception that US investors have deeper pockets: “We still had exposure to US investors, even though we listed on the LSE,” she explains. “Investors all over the world invest freely both at home and abroad. Where you are listed isn’t really a factor. We like to be seen as a UK business, because that is a strong differentiator for us. We also wanted our customers to participate in the listing, which was easier in London.”

While the listing location was never subject of debate, the timing of the IPO was a careful consideration. PensionBee decided to go public in April 2021, just two months after another technology firm – Moonpig - made its successful debut, sparking a whole wave of IPOs. However, another company listed just weeks before PensionBee’s IPO date, and lost a quarter of its value on opening day. Did this give Savova pause? “No. That company is a completely different business. Watching what happened to them was shocking for anyone in capital markets but we were sufficiently differentiated and unaffected by the governance issues that they were fighting.”

“What was opportunistic about our decision to list last year was the growth trajectory of the company,” continues Savova. “We have achieved significant growth and visibility, which meant we were comfortable meeting investors in a public context. We also needed capital and listing was preferable to another round of private financing. We wanted independent governance rather than shareholder representational governance. Finally, the general market sentiment was supportive at that time.” PensionBee listed on the High Growth Segment of the LSE. “This enabled us to list a smaller proportion of free float,” Savova explains. The Financial Conduct Authority has subsequently decided to relax the free float rules for the Premium market too, taking the minimum requirement from 25% to 10%. “We are now moving to the Premium segment,” reveals Savova. “We meet the governance rules and we want to be in the FTSE because that creates additional demand for shares.”

The changes to free float rules have made the UK more attractive to IPOs, she says, but there are still challenges yet to overcome. She cites the impact of the EU’s MiFID II trading rules, which require brokers to charge fund management clients for research separately from trading fees. “This has made it much harder for companies to acquire the right level of research post listing and has shifted the cost of research onto companies, which is undesirable,” says Savova. She also warns that the UK’s tendency to favour slow-growth companies that routinely pay out dividends could be hampering innovation and dynamism, especially in technology. “Companies pay dividends when they have nothing better to do with the capital,” she says. “They don’t see opportunities for growth and expansion so they return money to shareholders. When markets reward that behaviour, it is detrimental, both to the companies and the UK.” In order to have a strong and flourishing IPO market in London, Savova is calling on the government to liberalise research and to encourage investment into newly-listed companies as a distinct asset class, with Enterprise Investment Scheme (EIS) style incentives for investors. She also believes that reforms to capital gains tax could encourage more retail investors to participate in the stock market. “But it is important to invest in financial education overall,” she says. “We just don’t have that culture in the UK, and investment advice is often unaffordable.”

PensionBee has performed strongly over the past year, despite the ongoing macroeconomic turmoil, doubling revenues and increasing assets under administration by 90%. Savova is confident about her company’s future on the LSE. “If we want to ensure that our economy remains a top three global power, which it could be, you have to pay attention to what the stock market is doing,” says Savova. “I believe the government will do whatever it takes to make London a premium listing destination. If we support these listings as an asset class, support research, and support retail investors, then we will be at the top.” 

Vaccitech’s IPO journey

One of the chief considerations when choosing where to list is which location can give you the most visibility amongst customers and partners. For Vaccitech, which co-invented the Oxford AstraZeneca COVID vaccine, the answer was simple. The US is home to the largest and most sophisticated pharmaceutical industry in the world.

“You want to be close to the companies that want to work with you, be that in co-development or licensing,” says Vaccitech Chief Financial Officer, Georgy Egorov. “From a pharmaceutical industry perspective, the US is the largest market, representing a 70% share.”

The US biotech industry also dwarves the UK. “If you look at the S&P 500, after technology, healthcare is the largest constituent,” says Egorov. “This means that analysts there really understand the sector. Here in the UK, analysts might cover pharma and biotech but in the US there are niche specialists for biotech. This is important because they are two very different business models: one is cashflow generative and profitable, and the other has delayed cashflow and question marks over profitability.”

According to Egorov, US investors therefore have a greater understanding of biotech. This, combined with the size and scale of the US, means access to a deeper pool of liquidity. “This is why so many Brits move to the US to commercialise their ideas,” says Egorov. “I hear so many English accents when I’m over there. In the UK, our R&D capability is first class, but we are yet to see significant biotech companies because the ecosystem is in the US.”

Nevertheless, the decision to list on the Nasdaq was not entirely straightforward. “We considered Hong Kong, which is now a top three market from a market cap standpoint,” says Egorov. However, the US has a much higher tolerance for loss-making companies; there can be issues for non-cash-generative companies listed in Hong Kong. The time difference was also an issue; 12 hours between Hong Kong and New York. “In Hong Kong, the understanding of biotech isn’t that high, and we didn’t want to become an orphan stock.” An orphan stock is a company which has its headquarters, investors, and listing venue in different locations. “This meant that it all came down to the US or UK.”

Vaccitech’s valuation was not materially different in London in New York. “Our business is valued on discounted cashflows not peer analysis,” says Egorov. “So that was not an issue.”

As to fears that Vaccitech would swiftly move operations to the US following its Nasdaq IPO, the fast-growth firm has instead moved to a larger purpose-built state-of-the-art wet laboratory at the Harwell Science and Innovation Campus in Oxfordshire. “The biggest part of our operations is here,” says Egorov. “We have built our reputation here. When we say we are a spinout from Oxford University, everyone knows who we are.” However, recruitment constraints as a result of Britain’s departure from the European Union have become a challenge.

While some biotech companies have called for greater government investment, Egorov instead recommends a lighter touch. “We don’t need another massive sovereign wealth fund. If the government wants to stop companies leaving the country, we need open borders, R&D incentives and more incentives on stock options.”

Vaccitech’s journey to the public markets was an extraordinary one. “No one would have thought it was possible for us to go public only a couple of years ago,” says Egorov. “We were only five years old and small. In biotech, it typically takes 13 years to take an idea to market but we already had six clinical trial assets, which is unusual.”

The pandemic provided an unexpected tailwind for Vaccitech, which found itself at the eye of the storm. “We were working on a vaccine against MERS with Oxford University,” says Egorov. “When COVID-19 hit, we realised we could recalibrate that vaccine. We made massive progress in a short time and the banks said that the capital markets were now open to us.”

The path to become a public company in the US was not exactly straightforward for Vaccitech. It did not help that unfounded concerns about the safety of the Oxford AstraZeneca vaccine emerged right after the company hit the button on IPO preparations. The compliance required as a result of the Sarbanes-Oxley Act is onerous, as are the quarterly reporting rules in the US. “As an investment banker, I thought I worked long hours…” says Egorov. “But it’s super interesting and rewarding. This company does good in the world. I’m not out there saving lives, but our scientists are, and that’s what gets me out of bed every day.” 

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