British tech firms tempted to go public are being urged to go to the US, where - it is claimed - they can get proper analyst coverage, find more suitable investors and raise more money overall.
According to the head of the NASDAQ, the US technology exchange that is home to Apple and Facebook, London is taking the “right first steps” in developing its technology sector, but is still a long way behind behind the US.
Bruce Aust, NASDAQ’s vice-chairman and head of new listings, said: “The UK is getting there. The Government is recognizing that most jobs are going to come from these entrepreneurial companies. But Europe, and the UK in particular, needs to build that analyst community. When you go public, you want analysts to write about your stock. In the US, the average tech company has 20 analysts covering its stock. You don’t have that kind of numbers in the UK.”
Mr Aust pointed to the recent example of London-based financial data company Markit, which raised $4bn when it listed on the NASDAQ earlier this year.
The financial data company was created in a barn in Hertfordshire 12 years ago and is now based in London’s square mile. When listing on the NASDAQ in June, founder Lance Uggla said that Markit would continue to be headquartered in the UK and pay UK corporate taxes, but that listing in the US would give it the best access to capital to grow.
There are currently 14 UK companies listed on the NASDAQ, including Vodafone, WPP and Aviva.
Mr Aust, talking on a trip to London, added that 2014 has been a record year for the exchange, which has seen firms including wearable camera maker GoPro, Chinese microblogging website Weibo, and Virgin America join the market.
The exchange is close to hitting the 5,000 mark last seen in March 2000, the peak of the dotcom bubble.
Mr Aust said it is down to investors to decide whether we’re in another bubble, but that firms are now staying private for longer, an average of 8 to 10 years, to prove they are a stable investment.
He added the index will continue to surge next year, carried along by the wider economic environment. “Interest rates are at all time lows. We are expecting an interest rate rise mid-next year in the US, but it will be gradual. People are constantly looking for new things to invest in. There’s still a lot of money that can be put to work in the equity market.”
Applications to join the NASDAQ are almost double what they were a year ago. Around two thirds of applications, which each cost $25,000, are successful.
