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What happened? 

Raspberry Pi has confirmed that they will list on the Main Market of the London Stock Exchange this year. 

The company has a current valuation of £500mn. If the firm achieves its valuation, then the 104 staff could be set to enjoy up to £68mn windfall from the lsiitng. 

The announcement comes as a potential boost for the city, amid slow growth within the capital markets in the UK. 

More on the story 

Since the company began trading, Raspberry Pi has risen above its peers to become a leading developer and designer of low-cost and high-performance single board computers. 

The CEO of the company, Eben Upton, stated, “...the market for Raspberry Pi’s high-performance, low-cost computing platforms continues to expand. We have the technology roadmap to play an increasingly significant role, and we are excited to embark on the next stage of our growth.” 

At the end of 2023, revenues were $265.8mn (£211), with a gross profit of $66mn (£52mn) and an operating profit of $37.5mn (29mn).  

Their IPO is one of the most anticipated events of 2024 thus far (since the UK has also struggled to attract listings from big-name companies).  

A quick glance: Raspberry Pi 

What? Raspberry Pi designs and develops high-performance and low-cost single board computers. 

Founder/s: Eben Upton, David Braben, Alan Mycroft and others in 2009. 

Current CEO: Eben Upton 

An interesting fact about Raspberry Pi: Raspberry Pi has become the best-selling British computer of all time. 

What factors have led to this? 

• Assessing the data. In short, Upton may have wanted to play it safe by listing in the UK. Many UK based companies have chosen to list in US waters due to deeper pockets, a higher appetite for risk, among a range of other reasons. In the last 10 years, of the 20 UK companies raising over $100mn (£80mn), excluding SPACS, 8 have already delisted and 3 are trading above their IPO prices, according to City AM. If we look at one of the potential successes of a UK company listing in the US, such as Arm, we can see that Arm is a much bigger company in terms of its size and financial strength. For Upton, if they had listed in the US, the chances of them not doing as well could be higher, compared to if they list in the UK.

What implications could this story have?

For UK capital markets: Other companies could be encouraged to list in the UK, and not choose other countries. Faith and confidence within the UK capital markets can be restored and even heightened, should Raspberry Pi’s floatation be a success. The UK needs a revival in this area and the company could very well provide this.  

For Raspberry Pi: A potential success story will boost the company’s image, reputation, attractiveness to investors and its overall finances. Should the company reach its valuation, employee shares would be worth an average of up to £660,000 (when converted into ordinary shares.) Mr Upton has a 2.2% stake. He would have a stake worth around 11mn. If they reach their valuation, not only is the company set to do well, but its members will benefit from this too. 

For US capital markets: The success of any UK and non-UK company in a UK listing could make some companies turn their heads. But this will be some, not all. Belief, confidence and faith in the US capital markets is still very strong. Even if companies do turn around and decide to float in the UK, it may not make much of a dent to the US as major companies, often with multi-billion-dollar valuations, may want to stay put where they are.  

To list in the UK, the US and other stock markets...that is the question 

After much lobbing by the UK government, Arm Holdings chose to list on the US stock market, over the UK stock market. After being listed on the LSE, CRH, one of the FTSE 100’s biggest firms, revealed they’ll be moving their listing to the New York Stock Exchange.  

Both are important companies, and both are major blows to London’s stock market.  

This brings out some important questions, such as-

• Why don’t companies want to list on the LSE?

• What is causing them to delist from the stock exchange?

• What makes other stock exchanges, such as the NYSE, more attractive?  

I’ll give a response to the last question below. 

• The NYSE offers higher valuations. This is the case especially if you’re a tech company or a company operating within a market that is perceived to be valuable. The successes of companies like Amazon and Apple is a factor for the NYSE being able to offer higher valuations. Some reasons companies decide to go public, is to raise money, enter into new markets, expand the business among a range of other reasons. Companies want the highest possible valuation they can get. Some reasons include the fact that people may want the final valuation offer to reflect the value of the company (now and in the future), or others may want to exit after raising, in order to move onto other ventures. Higher valuations are often linked to higher trading volumes. Investors can buy and sell without significantly impacting the share price of the company, introducing stability into the process.  

What can the UK do to make itself more attractive for companies who want to go public? 

According to the Financial Conduct Authority, only 56 companies applied to list their shares on the LSE between January and November 2023. This marks the lowest number of applications in around six years. 

• We could reduce the costs. Listing on any stock markets requires fees, such as an admission fee and an annual fee for being on the stock market. However, the UK takes this requirement up a notch. For examples costs for assurance, audit, advisory costs and the cost of governance (to name a few), could be decreased in order to attract more companies to list in the UK. 

• Revamp the UK’s primary markets rules. Although this isn't ultimately down to the LSE (it’s down to financial regulators), they still play a very important role in shaping the requirements in order to list on the LSE. For example, changes could occur through altering the provision of financial information, on shareholder votes on significant transactions.  

Closing thoughts 

Overall, this is very welcome news to the LSE. I’m hoping that Raspberry Pi will have a successful float, because the UK needs it. 

Raspberry Pi can be seen as an example of how a company operating in a market, doesn’t just have to look at the ultimate valuation as the factor-it's a factor, that should be given the same weight as other factors when deciding. ‘Where is my flotation most likely to be the most successful?’, is one crucial question to consider. The US may have deeper pockets than the UK right now, however, not every company who lists across the pond is bound to do well.  

Wherever a company decides to list, the competition is heavy and the atmosphere intense and sometimes, a smaller stock market is where a company will find the most success. 

Let’s keep our eyes peeled for how the potential float will go.  

That’s it for this week! 

Until next time, remember to stay curious! 

What are your thoughts on the story? Do you think Raspberry Pi will reach their valuation? Will they eventually move to the NYSE? Let me know your thoughts. You can either comment below, message me on any of my social media platforms, or email me: hello@parahinsights.com. I look forward to hearing from you!

Further resources: 

‘Raspberry Pi confirms listing in boost for London’- Article by City AM 

‘Raspberry Pi staff set for £68mn windfall from London float’- Article by City AM 

‘Why did London Stock Exchange listing applications plunge in 2023?’ - Video by IG UK 

‘Why are firms choosing New York Stock Exchange over London?’- Article by Business Chief 

‘Calculating Fees’- Article by the London Stock Exchange  

‘How can the London Stock Exchange make itself more attractive as a listing venue?’- Article by the London Stock Exchange 

Disclaimer: 

This blog is for informational purposes only. Parah Insights is not associated with the news sources in this blog, and sharing does not equal endorsement. Parah Insights does not provide financial, tax, legal or accounting advice – always consult your financial and legal advisors to determine what’s right for you and your business.