Tech city voices
Why we chose to IPO in the US and not in the UK
Despite attempts by the London Stock Exchange to change their mind, John Newton decided to take his company public in the US rather than the UK.
In his first column he explains why Alfresco, his UK-headquartered company will join many other British tech companies in crossing the pond, and why you should consider doing the same.
Is the London Stock Exchange ready for a tech IPO?
Despite the recent launch of the London Stock Exchange (LSE) High Growth Segment, capital markets are still too immature in the UK to encourage IPOs. When compared to the established routes into the London Stock Exchange market, the High Growth Segment may be a step in the right direction, but it still does not come close to the success of NASDAQ or even NYSE. And historically it takes a number of successful IPOs before investors will re-engage resulting in more balanced deals.
Until we see a consistent series of companies successfully floating on the LSE, investors will continue to go to the US because it has the most attractive infrastructure, analysts and flourishing IPO market.
The business world is still recovering from 2011 and the failure of policymakers in 2012 to agree on a clear solution to the Eurozone’s fiscal difficulties have been the main reasons why IPO activity virtually came to a halt in the second half of last year.
Europe has made progress towards fixing problems and the US is proving its ability to sustain IPO market recovery, but I agree with Maria Pinelli from Ernst & Young who said that “in an uncertain market, companies should keep an open mind about their IPO options.
Long term thinking
A long–term view is essential. Taking a company public is not an event — it’s a journey. And it’s one of the most rigorous, transformational and scalable journeys a company and its executives will experience.”
There hasn’t been a good balance between investor demand for IPOs and supply since 2007 and while I am cautiously optimistic that we’ll see this trend reverse over the next year, we aren’t there yet.
European markets still haven’t recovered
Take for example the current $5 billion content management industry where we are currently seeing overcrowding and confusion. Cloud file-sync and share companies like UK-based Huddle and consumer-focused Box and Dropbox have all publicly commented on plans to go public within the next year and have chosen to do so in the US.
The fact of the matter is that in order to navigate the challenging unpredictable conditions of the European market, companies will need to continue to go where the money is and because of that we will continue to see more IPO candidates looking to float on an overseas market.
Government officials shouldn’t hold their breath to see whether the High Growth segment is attractive enough for Britain’s best, but look at the long-term impact of their financial efforts to take a more proactive role in encouraging sustainability.
The US holds the best future for my company
With my company, Alfresco, we initially considered going public in the UK and it might have happened if the conditions had been right. But a lot of the steps that the government has taken in the last few years have been backwards. The best future for Alfresco and its investors is to continue to grow and ultimately pursue an IPO in the US.
While building the company, the UK has been an important place for our main headquarters to be located, giving us access to some great engineers. Nevertheless, when it comes to going public, the liquidity for tech IPOs remains in the US.
John Newton, CTO and Chairman of Alfresco. In 1990, John co-founded, designed and led the development of Documentum®, the leader in content management acquired by EMC. John has also been an Entrepreneur-in-Residence at Benchmark Capital and was one of the founding engineers at Ingres® where he helped develop the world’s first commercial relational database.