‘A very problematic market’: As Arm shuns London, tech investors question UK as an IPO destination
Billionaire Masayoshi Son, chairman and chief executive officer of SoftBank Group Corp., speaks in front of a screen displaying the ARM Holdings logo during a news conference in Tokyo on July 28, 2016.
Tomohiro Ohsumi | Bloomberg | Getty Images
The U.K. may be a great place to build a tech company — but when it comes to taking the crucial step of floating your business, the picture isn’t so rosy.
That’s the lesson several high-growth tech businesses have come to learn in London.
When Deliveroo went public in 2021, at the height of a pandemic-driven boom in food delivery, the company’s stock quickly tanked 30%.
Investors largely blamed the legally uncertain nature of Deliveroo’s business — the company relies on couriers on gig contracts to deliver meals and groceries to customers. That has been the subject of concern as these workers look to gain recognition as staffers with a minimum wage and other benefits.
But to many tech investors, there was another, much more systemic, reason at play — and it’s been cited as a factor behind chip design giant Arm’s decision to shun a listing in the U.K. in favor of a market debut in the U.S.
The institutional investors that dominate the London market lack a good understanding of tech, according to several venture capitalists.
“It’s not the exchange, it’s the people who trade on the exchange,” Hussein Kanji, founding partner at London VC firm Hoxton Ventures, told CNBC. “I think they’re looking for dividend-yielding stocks, not looking for high-growth stocks.”
“Two years ago, you could have said, you know what, it might be different, or just take a chance. Now a bunch of people have taken a chance and the answers have come back. It’s not the right decision.”
Numerous tech firms listed on the London Stock Exchange in 2021, in moves that buoyed investor hopes for more major tech names to start appearing in the blue-chip FTSE 100 benchmark.
However, firms that have taken this route have seen their shares punished as a result. Since Deliveroo’s March 2021 IPO, the firm’s stock has plummeted dramatically, slumping over 70% from the £3.90 it priced its shares at.
Wise, the U.K. money transfer business, has fallen more than 40% since its 2021 direct listing.
There have been some outliers, such as cybersecurity firm Darktrace, whose stock has climbed nearly 16% from its listing price.
However, the broad consensus is that London is failing to attract some of the massive tech companies that have become household names on major U.S. stock indexes like the Nasdaq — and with Arm opting to make its debut in the U.S. rather than the U.K., some fear that this trend may continue.
“It’s a known fact that London is a very problematic market,” Harry Nelis, general partner at VC firm Accel, told CNBC.
“London is creating, and the U.K. is creating, globally important businesses — Arm is a globally important business. The issue is that the London capital market is not efficient, essentially.”
A London Stock Exchange spokesperson told CNBC: “Arm is a great British company and a world leader in their field which we continue to believe can be very well served by the U.K. capital markets.”
“The announcement 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. We are working with regulators, Government and wider market participants to ensure U.K. capital markets provide the best possible funding environment for U.K. and global companies.”
The ‘B’ word
Brexit, too, has clouded the outlook for tech listings.
Funds raised by companies listing in London plunged by more than 90% in 2022, according to research from KPMG, with the market cooling due to slowing economic growth, rising interest rates, and wariness around the performance of British firms.
Previously-published figures for the first nine months of 2022 place the fall in European funds raised at between 76% and 80% annually, indicating a less severe decline than the U.K.’s 93%.
Hermann Hauser, who was instrumental in the development of the first Arm processor, blamed the firm’s decision to list in the U.S. rather than U.K. on Brexit “idiocy.”
“The fact is that New York of course is a much deeper market than London, partially because of the Brexit idiocy the image of London has suffered a lot in the international community,” he told the BBC.
Cambridge-headquartered Arm is often referred to as the “crown jewel” of U.K. tech. Its chip architectures are used in 95% of the world’s smartphones.
SoftBank, which acquired Arm for $32 billion in 2016, is now looking to float the company in New York after failing to sell it to U.S. chip-making giant Nvidia for $40 billion.
Despite three British prime ministers lobbying for it to list in London, Arm has opted to pursue a U.S. stock market listing. Last week it registered confidentially for a U.S. stock market listing.
Developing research and development for cutting-edge chips is a costly endeavor, and Japan’s SoftBank is hoping to recoup its seismic investment in Arm through the listing.
Arm is expecting to fetch roughly $8 billion in proceeds and a valuation of between $30 billion and $70 billion, Reuters reported, citing people familiar with the matter.
Arm has said it would like to eventually pursue a secondary listing, where it lists its shares in the U.K. following a U.S. listing.
Is an IPO everything?
Still, regulators have sought to attract tech companies to the U.K. market.
In December, the government rolled out a set of reforms aimed at enticing high-growth tech firms. Measures included allowing firms to issue dual-class shares — which are attractive to founders as they grant them more control over their business — on the main market.
Last week, the Financial Conduct Authority also proposed simplifying the standard and premium equity listing segments as one single category for shares in commercial companies.
This would remove eligibility requirements that can deter early-stage firms, allow for more dual-class share structures, and remove mandatory shareholder votes on acquisitions, the regulator said.
Despite the negative implications of Arm’s decision, investors largely remain upbeat about London’s prospects as a global tech hub.
“Fortunately for us, it doesn’t mean that the UK is not attractive to investors,” Nelis told CNBC. “It just means that where you IPO is just a financing event. It’s just a place, a venue where you get more money to grow.”
A Xiaomi store in Shanghai, China, on March 16, 2025.
Qilai Shen/Bloomberg | Bloomberg | Getty Images
Chinese electric carmakers Xiaomi, Xpeng and Leapmotor each delivered nearly 30,000 or more cars in March, roughly twice several of their fellow startup competitors.
It’s a sign of how some automakers are pulling ahead, while BYD remains the market leader by far.
Xiaomi delivered a record number of electric vehicles in March, exceeding 29,000 units, the company announced on social media. That topped its prior run of delivering more than 20,000 vehicles in each of the past five months.
The SU7, Xiaomi’s flagship model, was involved in a crash on a highway on Tuesday that left three dead. The automaker on Tuesday afternoon released a statement on Chinese social media that the vehicle was in navigation on autopilot mode before the accident.
Based on preliminary information, the road was obstructed because of construction. The driver took control of the car but collided with construction infrastructure. Xiaomi added in the release that investigations were underway.
That came two weeks after the automaker announced on March 18 its goal to deliver 350,000 vehicles this year. There are also talks of the automaker expanding its second EV factory in Beijing to meet demand, Bloomberg reported on March 18. Xiaomi did not immediately respond to CNBC’s request for comment.
Its competitor Xpeng in March delivered 33,205 vehicles, the fifth consecutive month it has delivered over 30,000 units per month and reflecting a 268% surge in deliveries from the same month last year. March is also the fifth consecutive month the company has delivered over 15,000 units of the Mona M03.
Leapmotor delivered 37,095 vehicles, reflecting a 154% year-over-year growth. The Stellantis-owned automaker last month launched U.K. sales of two electric vehicle models, the T03 and the C10.
Li Auto delivered 36,674 vehicles in March, a 26.5% year-over-year increase, but fewer than every month in the second half of 2024. The company’s cars had gained early traction with Chinese consumers since most come with a fuel tank for charging the vehicle’s battery, reducing anxiety about driving range.
BYD sold 371,419 passenger vehicles in March, reflecting a year-over-year growth of 57.9%. Its overseas sales volume also hit a record high of 72,723 units in March.
In the same month, the automaker unveiled its “Super e-Platform” technology, which boasts 400 kilometers (roughly 249 miles) of range with five minutes of charging. The company in February also announced that it was integrating DeepSeek artificial intelligence to develop “DiPilot,” its advanced driver-assistance system.
Across the board, major companies across China’s electric car industry reported deliveries rose last month, indicating a pick-up in demand from the seasonally soft first two months of the year.
U.S. automaker Tesla sold 78,828 electric vehicles in China in March, marking a 11.5% year-over-year decline in growth.
Other Chinese carmakers saw growth in deliveries but some still struggled to break through the 20,000-unit mark.
Nio delivered 15,039 vehicles, a 26.7% year-over-year growth, but well below the number of cars delivered in the months of May to December last year. Nio-owned Onvo, which markets its electric vehicles as family-oriented, in March recorded 15,039 units in deliveries.
Geely-owned Zeekr delivered 15,422 vehicles in March, increasing by 18.5% year over year. The company last month announced its rollout of free advanced driver-assistance technology to local customers in a bid to compete in the market.
Aito, as of April 2, has not published its delivery numbers for March. The automaker, which uses Huawei tech in its vehicles, on social media had reported monthly deliveries of 34,987 and 21,517 in January and February, respectively.
Quarterly performance
On a first-quarter basis, BYD remained in the lead with 986,098 vehicles sold. The automaker, which overtook Tesla in annual sales last year, surpassed the U.S. EV giant in battery electric vehicles sales this quarter.
Tesla sold 172,754 vehicles in China in the first quarter this year, according to monthly delivery numbers published by the China Passenger Car Association.
Xpeng also reported strong growth, with a total of 94,008 vehicles delivered in the quarter ending in March, reflecting a 331% year-over-year growth.
Leapmotor saw quarterly deliveries more than double to 87,552 units from 33,410 units the same period in 2024, according to publicly available numbers the company published.
However, Li Auto and Nio reported weaker growth than their competitors in the first quarter of the year.
Nio saw 42,094 vehicles delivered in the three months ended March 2025, an increase of 40.1% year over year. Li Auto saw a slower year-over-year growth of 15.5%, with a total of 92,864 vehicles delivered.
A driver for an independent contractor to FedEx delivers packages on Cyber Monday in New York, US, on Monday, Nov. 27, 2023.
Stephanie Keith | Bloomberg | Getty Images
President Donald Trump on Wednesday signed an executive order shutting the de minimis trade loophole, effective May 2.
Trump in February abruptly ended the de minimis trade exemption, which allows shipments worth less than $800 to enter the U.S. duty-free. The order overwhelmed U.S. Customs and Border Protection employees and caused the U.S. Postal Service to temporarily halt packages from China and Hong Kong. Within days of its announcement, Trump reversed course and delayed the cancellation of the provision.
Wednesday’s announcement, which came alongside a set of sweeping new tariffs, gives customs officials, retailers and logistics companies more time to prepare. Goods that qualify under the de minimis exemption will be subject to a duty of either 30% of their value, or $25 per item. That rate will increase to $50 per item on June 1, the White House said.
Use of the de minimis provision has exploded in recent years as shoppers flock to Chinese e-commerce companies Temu and Shein, which offer ultra-low cost apparel, electronics and other items. The U.S. Customs and Border Protection has said it processed more than 1.3 billion de minimis shipments in 2024, up from over 1 billion shipments in 2023.
Critics of the provision say it provides an unfair advantage to Chinese e-commerce companies and creates an influx of packages that are “subject to minimal documentation and inspection,” raising concerns around counterfeit and unsafe goods.
The Trump administration has sought to close the loophole over concerns that it facilitates shipments of fentanyl and other illicit substances on the claims that the packages are less likely to be inspected by customs agents.
Temu and Shein have taken steps to grow their operations in the U.S. as the de minimis loophole has come under greater scrutiny. After onboarding sellers with inventory in U.S. warehouses, Temu recently began steering shoppers to those items on its website, allowing it to speed up deliveries. Shein opened distribution centers in states including Illinois and California in 2022, and a supply chain hub in Seattle last year.
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