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New York headquartered tech company Fadel Partners, Inc. (Fadel) recently announced the admission of its shares to trading on London Stock Exchange’s AIM. Fadel is a developer of cloud-based brand compliance and rights and royalty management software. Amidst ongoing doubts regarding the UK’s ability to lure technology firms, this recent development suggests that AIM remains an attractive market for companies such as Fadel.

In its admission announcement, Fadel describes AIM as a ‘natural fit’, with a demonstrable history of assisting technology companies in realising their growth ambitions. Fadel raised £8m in gross proceeds, bringing the company’s market capitalisation to approximately £28.8m on admission. The company aims to use the proceeds of the placing for general working capital and to support future growth by, amongst other things, investing in the expansion of its US and European sales, marketing, and innovation. Chief Executive officer, Tarek Fadel, on the IPO:

‘This investment will allow us to expedite our growth strategy to scale alongside the rapidly expanding digital content and IP market and to capitalise on the significant opportunity available to us’.

Ariel White-Tsimikalis, Partner at Goodwin Procter commented on the AIM IPO:

‘AIM can be an attractive entry point for growth companies who are too small (sub $1bn valuation) to list on Nasdaq (the costs of listing outweighing the benefits for a company of that size) but who want to access the public markets at an earlier stage in their life cycle to help fund their growth strategy. The reduced eligibility and on-going compliance obligations of AIM make it an attractive market for earlier stage growth companies. There is a growing list of US-based companies who have done just this: MaxCyte, TinyBuild, Devolver, etc. Many do so with the aim of using AIM as a steppingstone to Nasdaq. MaxCyte is a good example; it achieved a $1bn valuation when it jumped up to Nasdaq after “incubating” on AIM for a few years.’

Fadel is the first tech company to conduct a London IPO in 2023. The New York headquartered company’s London IPO may come as a surprise to some, in the aftermath of British tech giant, SoftBank’s Arm Holdings, opting to list on the New York Stock Exchange, despite the UK government’s several attempts to persuade it to apply for a public listing in London. On a similar note, Dublin-based building materials provider, CRH recently decided to move its primary listing from London to the US. Despite this, London’s AIM remains a popular destination for technology companies.

According to Market Tracker data, the Technology sector dominated AIM in 2022, leading the way with four IPOs. The Industrials and Mining, Metals & Extraction sectors also showed strong activity, each having two IPOs. Collectively, these three industry sectors contributed to over 65% of all IPOs in 2022. Despite certain recent concerns, 2022 Market Tracker data also indicates that London continues to be an attractive destination for overseas companies, with 24% of all IPOs in 2022 being incorporated outside of England & Wales. Fadel is not alone in selecting a UK listing over a US one; in 2021, Texas-based tech company Devolver Digital Inc also chose to list on AIM instead of in the US. Ariel commented on the trend:

‘I see this trend as a real opportunity for AIM to differentiate itself and truly be the growth market it was meant to be. There are many European-based companies, particularly in the Nordics, who would also fit this profile – too large for a local listing (eg First North in Stockholm or Amsterdam) but not quite big enough for Nasdaq. This is a great opportunity for London to scoop up those smaller to mid-cap companies given there is no truly comparable market to AIM in Europe or the US. These high growth companies are the future disruptors and leading innovators in their respective sectors, the future class of Big Tech and Big Pharma, and AIM can help London attract them early.’

Davey Brennan, Partner and co-chair of global technology at Gowling WLG, also commented on Fadel's decision:

‘Fadel's decision to list in London is welcome news indeed for both AIM and UK capital markets more generally. A company's decision on where to list is driven by so many factors, so the ecosystem surrounding our UK capital markets needs all components to be functioning properly to ensure that the UK remains competitive. Regulation is clearly a key component of this ecosystem and much has been written about the proposed Edinburgh reforms, which promise a significant shift for UK financial services policy. However, UK policymakers have a fine line to tread when it comes to ensuring that the UK markets regain their position as first choice for global issuers. We need to introduce reforms designed to increase UK market competitiveness, yet also retain London's gold standard reputation when it comes to regulation. What is clear, is that the speed of implementation of such reforms is absolutely key.’

Ariel expressed her anticipation for the future:

‘As part of the broader efforts to reform our UK listing regime to attract more growth companies, I would like to see greater focus on increasing the profile of AIM. For me, it is the critical gateway to attracting more of these companies to London; thereby strengthening the Tech and Life Sciences ecosystems in the UK so that more home-grown as well as European and US-based growth companies choose to list and stay here.’

Market Tracker will continue to monitor developments in this sphere. For more on 2022 IPO data, see our upcoming Equity Capital Markets trend report.