London to benefit from slew of tech unicorn floats

Deliveroo chief executive Will Shu is expected to pick London

A market source says: “In many ways London should play to their advantage. There is a lot of money looking for UK companies.”

Deliveroo has been tipped for at least a $4bn valuation, but sources are hoping for a much greater price following the successful float of US company Doordash, which is valued at $50bn. Deliveroo declined to comment.

“Deliveroo will have looked at what happened with Doordash,” the source adds.

Darktrace, the cyber security company, confirmed it is pursuing a London listing over the summer. Its biggest investor is Mike Lynch, the billionaire behind Autonomy. Lynch is currently embroiled in litigation in High Court with US software giant HP, which accuses him of fraud. He is also facing extradition to the US on the charges of fraud, which he denies and is fighting. 

As well as these two trophy deals, reviews site Trustpilot, online card designer Moonpig, and gadget recycler MusicMagpie are all reportedly planning floats in 2021. 

MusicMagpie told Reuters it was “reviewing a number of attractive alternatives to best support our continuing rapid growth”. Moonpig said it “constantly evaluates funding options”.

Not every UK technology company is going to pick London, however. Worldremit, the payments technology business, is reportedly considering floating in the US, according to Bloomberg. 

Bankers add that a cycle of private equity deals over the last two to three years is also coming to an end, and many funds will be looking for an exit.

The slew of deals could continue in London for some time. Starling Bank, the challenger bank, is said to be eyeing a float in 2022. 

A natural fit

And the Government is hoping to crack the market open further to encourage more listings, although any changes are unlikely to affect things next year.

Lord Jonathan Hill has been appointed by Rishi Sunak to lead the review. Under consideration is cutting the free float requirement below 25pc, encouraging listings from companies with dual class share structures — a common feature of tech start-ups — and opening the market to more secondary listings.

Because of the tight governance rules on the FTSE 100, The Hut Group does not get a spot — despite being large enough. Moulding’s founder shares, which give him a veto over takeovers, mean the company misses out on a place that would see it picked up by more fund managers. Moulding has called for reforms that would grant similar deals a place on the premium market.

Those tweaks, if they are accepted by fund managers, could tease a few more companies away from a state-side float.

“For a lot of UK businesses London is the natural place to list,” says Cooley’s Keast-Butler. “If high-growth companies can get what they want in London, then it is a compelling prospect.”