Unlike some in the industry, JPMorgan’s Matt Gehl doesn’t think Europe’s stock exchanges are in a ditch. But the head of the bank’s EMEA tech investment team also doesn’t think that European stock markets — which have seen about as many tech delistings as listings this year — will be the first choice for many of the continent’s biggest international tech companies.
“The majority of the European companies with a global footprint are looking to the US,” he says. “It’s natural that people are going to look to where the greatest success has been,” Gehl says. “I’d say 90-100% are leaning [towards the US]; all of the big names you hear rumoured all the time.”
Sweden’s buy now, pay later giant Klarna is reportedly considering a New York listing in 2025, while British neobank Revolut’s founder Nikolay Storonsky last year ruled out a London IPO (although its chair more recently said it would “keep an open mind” on venue). Cybersecurity company Darktrace, which listed on the London Stock Exchange in 2021, is currently delisting — while Cambridge, UK-based chip designer Arm opted to re-list in New York, not London, last year.
US vs Europe
The decision is less simple for European scaleups without a presence in the US, says Gehl. By Sifted’s count that would include healthtech unicorns Kry, Alan and Doctolib, mobility giants Bolt and BlaBlaCar and neobanks Monzo, Starling and N26, to name just a few — although Monzo is planning to attempt US expansion for the second time soon.
For a US listing to make sense for those companies, “they need to stand out from a size standpoint, a growth standpoint and a differentiated business model standpoint… otherwise why would a US investor care?” says Gehl. European companies listing in the US will need to have at least a $5bn-10bn valuation, he adds.
Then there’s the time commitment. “[To list in the US], you have to commit a hell of a lot of time to roadshows in New York and Baltimore… That’s easier if some of your business is in the US,” he adds.
Location, location, location
Wondering where a company plans to list? “Look at where the CFO sits; if it’s in New York or Boston, that’s the biggest flag that could be waved that anyone is intending to go public in the US — or if they sit in London, but have experience [taking a US company public]. They’re going to want someone who’s done that before,” says Gehl.
Next sign that a company’s sights are set stateside? “You’ll start seeing them appear at conferences in New York, Miami and San Francisco.”
If it’s all going to plan, there will then “start being a buzz around them — and US mutual fund investors will start talking about them,” says Gehl.
When to list
As for when all these IPOs might happen, right now everyone’s playing a big game of chicken.
“Most people don’t want to go first,” says Gehl. “That’s why Reddit’s IPO [in March] was so important for internet companies, and Arm’s IPO [in September 2023] paved the way for a semiconductor revival.
“European companies aren’t ever going to be the first in the IPO wave; they’re waiting for Americans to go. If it turns from a drip to a pour in the US, then the usual suspects in Europe will go.
“But I think we’re very unlikely to see any European tech companies IPO in 2024.”
Europe’s challenge
For those European tech companies that do choose to list in Europe, things aren’t perfect, Gehl adds. “There’s a lot more work to be done in Europe,” he says, counting London, Amsterdam and Paris as one market — one pool of capital — as far as JPMorgan is concerned.
“There is a structural issue; there are just fewer funds investing in stock, let alone tech, in Europe. We need money to be shifted out of bonds and trackers and into the equity markets. Until that’s done, the big funds will only want to buy big, highly liquid names.”
M&A
An alternative exit? Getting acquired — if your company is small and inexpensive enough.
“There aren’t many people buying the scaleup companies,” says Gehl. “It’s mostly strategic M&A; $700m-2.5bn deals.
“There’s a general perception that VCs haven’t reset their expectations on value yet — so strategics (corporates) much prefer to buy PE-backed companies,” he adds; in those deals, “you’re speaking to one owner, rather than four or five VCs who all think they own the business.”
As a result, some public companies are looking at acquiring other public companies — where premiums have normalised. “You can’t argue with your stock price.”
At the earlier stage, we’re likely to see some mergers too. “We’re starting to see early-stage companies talk to one another about potential marriages,” says Rosh Wijayarathna, co-head of JPMorgan’s EMEA innovation economy team.
Corporate investors are also stepping up their activity. “In larger fundraises, we’re seeing non-traditional investors come in, some corporates and CVCs doing larger deeptech rounds,” adds Wijayarathna — an indication that they might look to acquire those companies in the future.
“It’s so competitive — the race for arms, AI, technology — that they’re hedging through a number of different investments.”
Read the orginal article: https://sifted.eu/articles/jpmorgan-interview-listing-usa/
