Where Should You Go Public?


While the New York exchanges, NASDAQ and NYSE, have traditionally been seen as the place to list for tech companies from around the world, the London Stock Exchange is fighting back, having introduced the High Growth Segment to attract entrepreneurial companies to list in London, and changing the rules for companies listed on the AIM (Alternative Investment Market) to make it more attractive.

We asked two leading executives to say why their companies have opted for the city they did.

John Newton, CTO and Chairman of Alfresco speaks for New York, while Nick Beighton, the Chief Financial Officer of ASOS speaks for London.

NEW YORK: John Newton, CTO and Chairman of Alfresco

Many have asked why Alfresco, a UK-headquartered tech company, would choose to go public in the U.S. rather than at ‘home’ and what the London Stock Exchange (LSE) could do to encourage companies like ours to stay local. Listing here in the UK was something that we considered and it might have happened had the conditions been right, however there were just so many more reasons to go across the pond.

When we first began thinking about going public, we gave serious consideration to listing here on the London market. The government at the time had made the decision to cut Capital Gains tax, and it appeared the UK could become an environment that was competitive with the U.S. market. This was a time when venture capital really started taking off. Then with the reintroduction of regulation and the changing of the Capital Gains Tax, a big step backwards was taken.

Despite these setbacks, I do believe that the LSE could be a desirable destination for companies and I’m hopeful that at some time in the future, listing high-growth technology companies in London will be the done thing. The New York Stock Exchange (NYSE) was able to transform itself into a high-growth market and surpassed NASDAQ in terms of new issues, so there is still the chance the LSE could grow to be an attractive option in the future for tech companies.

The recent launch of the LSE High Growth Segment is definitely a step in the right direction. However, at this stage, capital markets are still too immature in the UK to encourage IPOs. A series of companies successfully floating on the LSE will encourage UK companies to list locally. Until then, investors will continue to go to the U.S. because it has the liquidity and the proximity to the markets, the analysts and the investors.

This is where the government plays an important role. What is required from the government is for it to put its money where its mouth is. It’s all well and good to talk about the importance of high-tech growth in the UK, but, what’s really required is investment in local companies in order to encourage sustainability. If you look at companies like Microsoft and Oracle, they wouldn’t exist without U.S. government investment, especially in the early days. Last year, the Mayor of London, Boris Johnson, spoke at the Innotech Summit and urged companies in the UK to buy British Tech so that the UK technology industry would have a chance of matching Silicon Valley. Frustratingly, Alfresco has always found that the UK government has tended to spend more with U.S. vendors rather than with British companies.

The most significant event for any company is going public. After long consideration, we decided that the best future for Alfresco, and its investors, is to drive our growth and ultimately pursue an IPO in the U.S. We appointed former SuccessFactors president Doug Dennerline as our CEO and he will run the company from San Francisco.

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 only place to be is in the U.S. – at least for now.

LONDON: By Nick Beighton, Chief Financial Officer of ASOS

ASOS has been listed in London on AIM for 12 years and has experienced life as a small and large company so we are well placed to comment across the spectrum. From a market capitalization of £12 million in 2001, we have grown to be valued at over £5 billion today. Overall the experience has been good. It has provided an excellent platform for our growth, the market has understood our story and valued and encouraged our growth.

ASOS has been one of a few disruptive technology businesses on the London market alongside Ocado, Rightmove and now AO World.com. Each has demonstrated the power of the e-commerce model and the markets willingness to value such businesses on par or even at a premium to their U.S. counterparts dissolving any argument of transatlantic arbitrage.

Support has come in many guises: global institutional investor understanding and support as our business has grown and internationalized; private money support as there is favorable tax treatment for investors on AIM; a largely positive media that has helped us grow our brand; and high-quality advisers that have guided us on our growth path and how to present it. Probably none of this would have been achieved without the structure and status that a London listing has provided. We also would not have had access to, or been able to hire, the directors from a very early stage who have helped shape our growth without our share structure to incentivize them.

Growing from a UK base, into Europe and then further afield, it was appropriate that we listed in London. Would the U.S. even have supported a small start-up, based in the UK with a UK focus to start with…this we are unsure of.

As we have grown, AIM has not provided any barriers to global institutions that have wished to invest. Institutions are increasingly running global mandates, particularly the largest domiciled funds which offer international and global products and are totally agnostic to location of listing instead focusing totally on the quality of the business, its growth dynamics and its potential.

Perhaps there was an argument about where one should list 10 years ago with the benefits of a more tech savvy and sympathetic market in the U.S. There is no such case now as the world has got considerably smaller, investors ever more keen to seek out disruptive business models wherever they are and there being no international barriers to investment.

The UK is a leading global e-commerce player. The knowledge that the UK capital markets have gained through exposure to the successes that are ASOS, Ocado and many others when comparing notable failures in the U.S. such as Zynga and Groupon makes listing in the UK more attractive.

ASOS is now a global business and has approximately 75% of its shareholder register held by international investors. London is a liquid and transparent capital market that functions well for those who are listed on it and those that invest.

Did we ever consider a U.S. listing? No. Has London been good for us? Yes. We would recommend it most highly.



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