New York Beats London to Land Arm IPO, One of Year's Largest

And lots and lots of money... This is the biggest dream of a Lithuanian. And you over there in the UK do Brexiting a little more, everything will be like in Lithuania - smelly outdoor toilets.

"New York beat out London to win the coveted listing of British chip designer Arm Ltd., a move that underscores the magnetic pull of the U.S. for big business and the diminished profile of the U.K. as a global financial capital.

Arm became the latest among a group of companies that have spurned London for the U.S. New York has deeper pools of capital, and a more vibrant investor base willing to pay more for shares than in other markets, executives say.

Arm chose to list in New York largely because of the greater scale and more robust liquidity of U.S. markets, and it will be deciding between the NYSE and Nasdaq in the coming weeks, according to people familiar with the company's thinking.

A U.S. listing is "the best path forward for the company and its stakeholders," Arm Chief Executive Rene Haas said Friday.

New York and London have battled for decades to be the world's largest capital markets, alongside other financial hubs such as Hong Kong, Singapore and Tokyo. 

In the mid-2000s, a deregulation push in the U.K. prompted hand-wringing in New York over a potential loss of competitiveness. Executives worried that London would eclipse Wall Street in attracting big companies to list on the stock market, sell bonds and trade securities.

But the past decade-and-a-half has seen a shift in fortunes toward the U.S. Stock markets in the U.S. have skyrocketed in value ahead of peers thanks to the rise of tech-driven giants such as Apple Inc. and Microsoft Corp.

Arm is one of the world's most important behind-the-scenes semiconductor businesses. Its technologies power the chips in more than 95% of smartphones and U.K. authorities have fought for months to convince its owners to list the company in London as well as New York.

Owned by Japanese tech investment company SoftBank Group Corp., Arm last year abandoned plans to be sold to U.S. chip company Nvidia Corp. The listing is a backup plan championed by SoftBank founder Masayoshi Son to extract maximum value from the company. Arm had been listed in London before SoftBank took it private in 2016 for $32 billion.

The listing in New York could value Arm at more than $50 billion, according to analysts, though SoftBank will push to get a higher number, hoping that a booming chip sector and comparisons to U.S.-listed chip companies will increase Arm's attractiveness. At that size, it would be near the top 10 stocks in the U.K., but only around 150th-largest in the S&P 500.

New York's dominance over London has grown over time. At the end of last year, the combined market cap of listed companies at the NYSE and Nasdaq was $40.3 trillion, roughly 13 times the $3.1 trillion at the London Stock Exchange, according to data from the World Federation of Exchanges. A decade earlier, the combined market cap at the two U.S. exchanges was about six times LSE's total market cap, WFE data shows.

"They're going to come here, because this is where the money is," said Lou Pastina, managing member of Global Markets Advisory Group, a New York-based consulting firm.

U.K. markets, by contrast, remain dominated by slower-growth banks, energy companies, and consumer names. Many such as HSBC Holdings PLC, BP PLC and British American Tobacco PLC have histories stretching back to when the U.K. was a colonial empire. The few tech companies are small and not comparable to Arm.

A main driver for companies preferring New York listings is the higher valuations investors give to companies. Many deep-pocketed U.S.-based institutional and individual investors don't allow themselves to buy securities on foreign exchanges or can't be bothered incurring the currency risk and other hurdles that come with investing abroad.

Also at play is the booming U.S. economy and the growth of many overseas-owned businesses in the U.S.

CRH PLC, a Dublin-based construction company listed in London, said this week it plans to move to a New York listing. It called the shift a logical step since the company generates about 75% of a key profit measure in North America. CRH is betting the move will generate "commercial, operational, and acquisition opportunities."

U.K.-listed sports betting and gambling company Flutter Entertainment PLC said last month it is considering an additional U.S. listing because its U.S.-based online gambling business, FanDuel, is Flutter's largest by revenue. Flutter said the listing would give it access to deeper capital markets and a new source of U.S. domestic investors.

Ferguson PLC, a U.K.-based supplier of plumbing equipment, made the New York Stock Exchange its main trading venue in May 2022. Since then, the company's valuation multiple has expanded about 18% to trade for more than 15 times forecast earnings, according to FactSet.

Julia Hoggett, CEO of London Stock Exchange, a unit of the London Stock Exchange Group, said Arm's move to the U.S. demonstrates the "need for the U.K. to make rapid progress in its regulatory and market reform agenda, including addressing the amount of risk capital available to drive growth."

British executives say their home-country investors tend to be more risk-averse than American counterparts.

There is "a lot of experience of investing in development-stage companies" in the U.S. compared with Britain, said Denise Scots-Knight, chief executive of London-based drug developer Mereo BioPharma Group PLC." [1]

1. New York Beats London to Land Arm IPO, One of Year's Largest
Dummett, Ben; Osipovich, Alexander; Mitchell, Josh.  Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 04 Mar 2023: A.1.