Exclusive: SPACs on LSE will power ‘IPO bonanza’ in London, says Silicon Valley Bank dealmaker
To make the UK a more attractive place for investors, the government plans to allow Special Purpose Acquisition Companies (SPACs) to list in London and ease a range of share listing restrictions at the LSE, Jonathan Hill’s report.
Hill’s report into future financial services regulation calls for a range of deregulatory measures that aim to “ensure the UK remains one of the most attractive places to grow and list successful innovative companies”.
To find out what City insiders make of the proposed changes, Morning Wire caught up with Square Mile-based Rosh Wijayarathna, since 2019 head of corporate finance EMEA at Silicon Valley Bank. Before that, he was nearly a decade with Barclays in Canary Wharf.
Rosh, there is no doubt SPAC is a true buzzword at the moment. What do you make of this phenomenon, Rosh?
Although SPACs have been around for some time, in the last year, the US SPAC market has experienced a boom, with 405 vehicles listed in 2020 raising $125bn. This is a reflection of the amount of capital that is available looking for new and innovative ways to be deployed.
However, Europe isn’t just watching from the sidelines anymore and is beginning to see more SPAC activity take place, which we anticipate to increase, especially if the recommended changes to the London Stock Exchange are implemented.
The LSE changes could help our domestic listing market stay competitive and a dominant player in the European market for entrepreneurs.
Whilst SPACs are a great tool to raise capital and provide an alternative route to public markets, it’s important to be mindful of the governance and reporting responsibilities that come with going public. Lots of companies will be looking at going public via a SPAC, but they still need to make sure they’re IPO-ready and aren’t taking advantage of the wrong tool at the wrong time.
Could it mean a big IPO bang for the City, as some predict?
Rosh Wijayarathna: According to Pitchbook, private equity deal activity in Europe will set a new record high this year and one of the factors driving this will be the potential softening on UK listing rules to allow SPACs to more closely reflect US structures. There are about 20 high profile European companies that are rumoured to be IPOing in the next 12 to 18 months, and we’ve already seen the likes of Pension Bee and Darktrace IPO, which reflects the level of investment we have seen over the last 5-10 years in the innovation ecosystem and is a promising sign of the health and robust pipeline of the European IPO market.
A thriving and future-proofed UK public market has a vital role to play in the UK’s post-Covid recovery from an investment and job creation perspective.
We welcome the recommendations laid out in the Hill Report, which have been driven by those who best understand the challenges and opportunities ahead for companies looking to go public.
Besides Hill’s recommendations, what else is needed to boost London’s IPO market?
The adoption of the measures laid out in the report will go a long way to ensure the necessary conditions for London to capitalise on this competitive edge to become the de-facto market for UK and European companies to list as well as attracting a more diverse investor base. Beyond the report’s recommendations however, we need to do more to educate and attract domestic institutional investors, like pension funds, to support home-grown tech companies so UK pension holders benefit from the returns within the UK innovation economy.
Based on Many industry experts expect an “IPO bonanza” in London this year. Do you share that view?
Yes, absolutely. We have already seen some high-profile IPOs take place over the past few months from The Hut Group, moonpig, Trustpilot, Darktrace and Pension Bee. The expected IPO activity is a clear output of scale up growth and the work that has occurred over the past five-plus years.
What’s also exciting is that we have further cohorts lining up behind them, creating future waves of IPO activity in the UK and Europe, across a variety of sub-sectors.
It is a testament to the maturation of talent and world class innovation companies that we now have, with an increasing stable ready to go public in 2021. Our hope is that the majority choose London to list, driving further enterprise value, IPO demand and recycling of capital back into the UK ecosystem.