Listings: City’s disarmament will spark heated debates over SoftBank’s New York plan

It’s hardly a coup de grace for the City of London. But SoftBank’s refusal to list Arm in London is a major blow. More than one UK Prime Minister has lobbied for the Cambridge-based chip designer to return to the UK stock market. The autopsy of this diplomatic failure will be messy.

Arm is a rare beast: an indigenous British tech success story. This former backroom start-up has surpassed Intel in low-energy chip design. The owner’s decision to list the group in New York, coupled with a slow exodus of multinationals, is diminishing London’s status as an international financial hub.

The diminishing financial benefits of listing in post-Brexit London are partly to blame. UK equities are trading at a discount. They are denominated in sterling, a currency that has been weak and volatile of late. Liquidity has decreased.

The building materials company CRH is the youngest to pack its bags. It will head to New York, as plumbing company Ferguson did last year. Bookmaker Flutter is likely to follow suit.

SoftBank is right that Arm’s future lies in the US, the heartland of global technology. Arm’s chip architecture, which it licenses to manufacturers, dominates devices like Apple. New markets, including the automotive industry, contribute to the increase in sales. They rose 28 percent year over year in the most recent quarter.

Still, the cash-strapped Japanese investment group is lucky to have surpassed the $32 billion it paid for Arm in 2016. British investors were only too happy to sell the company at the time. You got a good price. Stocks had suffered from the highs of the era. Technical excellence hasn’t made Arm a hugely profitable business.

Arm cites London’s disclosure rules as a reason for choosing New York. UK regulators will face an uncomfortable scrutiny. So becomes the London Stock Exchange Group. Its success as a data company may have distracted it from its role as a stock market — a lower-margin company that’s nonetheless a national institution.

The Lex team is interested in hearing more from readers. Please let us know what you think about the competitiveness of the London stock market in the comments below Listings: City’s disarmament will spark heated debates over SoftBank’s New York plan

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