FCA mulls listing rules after Hauser blames 'Brexit idiocy' for Arm's New York IPO
Flotations in the UK down 40% since 2008, might be more at play than UK's split from EU
The UK's financial regulator is looking at ways to make London more attractive for companies in the wake of Arm choosing to list in New York and Herman Hauser blaming the decision on "Brexit idiocy."
Brit chip designer Arm disclosed over the weekend that it had filed for a public listing with the US Securities and Exchange Commission (SEC), as reported by The Register.
The company earlier signaled its intention to list shares only in New York, at least initially, rather than apply for a dual listing with London Stock Exchange, which UK government lobbied for extensively.
Hauser – who as CEO of Acorn Computers enabled the genesis of the Arm architecture in the 1980s – told BBC Radio 4's Today program that Britain leaving the EU was partly to blame for making London a less attractive destination for investors.
Hauser said that to list for an initial public offering (IPO) on two stock exchanges at the same time would be a huge administrative effort, adding that "New York of course is a much deeper market than London," and "because of the Brexit idiocy the image of London has suffered a lot in the international community."
But Hauser did not entirely blame Brexit, and has previously been critical of UK government policy in general when it comes to support for technology companies. He was signatory to an open letter to Prime Minister Rishi Sunak from a number of industry leaders and organizations calling for urgent action on a national semiconductor strategy. (That was in January. The country still doesn't have one.)
Hauser also last year complained to Bloomberg's Technology Summit in London that the UK has "no chance in hell" of being technologically self reliant, partly because Britain fails to retain local ownership of many successful companies that start here, like Arm.
On the back of Arm's high-profile decision not to list in London, UK regulator the Financial Conduct Authority (FCA) has now said it wants to "reform and streamline the listing rules" that companies must follow to be allowed to list their shares in the UK to make these "more effective, easier to understand and more competitive."
While the UK has been Europe's biggest financial hub for many years, listings on the local exchange have reduced by 40 percent since 2008, the FCA noted. It claims the listing regime in the UK has come to be seen by some issuers and advisers as "too complicated and onerous."
This echoes sentiments that Arm expressed with regards to a London listing: the company was concerned about regulations that would require it to report to the FCA on any dealings it had with its parent company SoftBank or any of the numerous other technology companies that SoftBank owns or has a significant stake in.
Such dealings might conceivably include Arm being made guarantor to a loan taken out by SoftBank that would have left the chip designer on the hook for the $8.5 billion amount if certain conditions had not been met.
The FCA is proposing significant changes to the listing rulebook, including replacing the existing "standard" and "premium" listing segments with a single category for equity shares in commercial companies.
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A single equity category would remove eligibility requirements that can deter early-stage companies, the FCA claims, and remove mandatory shareholder votes on transactions such as acquisitions in order to reduce "friction" on companies pursuing their business strategies.
However, others have previously warned that the point of many of the existing regulations is to protect investors, and the FCA could be making investment more risky by adopting significant changes.
This would appear to be tacitly acknowledged by FCA chief executive Nikhil Rathi, who said in a statement that "our proposed reforms would significantly rebalance the burden of regulation to the benefit of listed companies and investors who are willing to set their own risk appetite and terms of engagement."
The Arm IPO looks set to be one of the most significant this year with valuations for the company varying between $30 billion and $70 billion. Arm itself is said to be likely to raise at least $8 billion from the public offering, although parent SoftBank appears increasingly likely to retain overall control of the company after it floats on the market. ®