Following a drab year for UK stock market flotations in 2023, there was a real shot in the arm for sentiment for the London Stock Exchange this morning, with the affordable computer supplier Raspberry Pi getting off to a rip-roaring start to life as a public company.
Shares in the business were priced at 280p each – at the top of the range published prior to the Initial Public Offering (IPO) – which valued Raspberry Pi at £541.6m.
Within minutes of conditional trading beginning, though, the shares had soared to as high as 392p each.
The successful debut will raise hopes that more IPOs will follow and particularly in the tech sector that has underpinned the strength of US stock markets in recent years.
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Last year was a truly dreadful one for the UK market in terms of businesses going public.
Just 23 companies came to market, down 49% on 2022, which was the lowest total since at least 2010. And the sum raised by those companies coming to market, £953.7m, was down 40% on the total raised in 2022.
Nor was the ‘after market’ anything to write home about. Shares of CAB Payments, which was the biggest company to list in London in 2023, currently languish at less than half the value at which they came to market – having been down by some 85% at one point from the offer price.
That is why today’s strong debut from Raspberry Pi, which raised £166m during the IPO, is so important.
Eben Upton, the founder and chief executive of Raspberry Pi, told Sky’s US partner CNBC: “It’s just a fantastic day, the culmination of a huge amount of work by a lot of people, I couldn’t be happier.”
This debut is not just important for Raspberry Pi itself but also for the London Stock Exchange after it lost out to the US last year for the listing of another prominent Cambridge-based business, Arm Holdings, the chip designer.
Explaining why Raspberry Pi had chosen to list in London, Mr Upton said that he had thought about a listing in New York last year and had been “drawn towards” it, but had realised the “smart money in the US will find you wherever you are”.
He added: “There are compelling advantages to this market compared to other possible listing venues.”
So what are investors – including retail investors, who were allocated just over 4% of the shares being sold – getting for their money?
Raspberry Pi was founded in 2012 and describes itself as being “on a mission to put high-performance, low-cost, general-purpose computing platforms in the hands of enthusiasts and engineers all over the world”.
It has sold more than 60 million low-cost single board computers since it launched, including 7.4 million last year, while it is targeting sales of 8.4 million this year. It is also already profitable, reporting an operating profit last year of $37.5m on sales of $265.8m.
Mr Upton said that, despite the company originally having started out with the aim of providing an affordable computer that young people could use and its reputation of catering for ‘hobbyists’, it was now a different proposition.
Nearly three-quarters of its sales are now for industrial applications such as security cameras and ventilation controls.
He told CNBC: “That’s the surprise for us – as an organisation which has come from this enthusiasts base, that still sees enthusiasts as the heart of the movement, what we’ve realised over the years is that many of these enthusiasts are professional design engineers.
“They take Raspberry Pi with them into work – they get excited about it at home, the next time they are challenged to solve a problem, they take Raspberry Pi with them, they reach for the tools they understand.
“We’ve seen adoption across a very broad range of markets from digital signage to industrial control. The challenge will be to stay faithful to the roots of Raspberry Pi in that enthusiast and educational movement even as we do more in industrial.”
Mr Upton, whose stake in the business was valued at £11.9m at the offer price, said during roadshows the company has an addressable market of $21.2bn.
He said that Raspberry Pi’s advantage, in going for that market, was two-fold.
He added: “We’ve built an organisation… that has these end to end capabilities – we do everything, build semiconductor IP (intellectual property), we build chips, we build board level product, we do software, we assist our customers in design. It’s that breadth of the organisation.”
Welshman Mr Upton said that Raspberry Pi also enjoyed “compelling cost structure advantages” which enabled it to sell products cheaply and that this would be the “lever” for penetrating the larger industrial market.
The company – whose backers include Arm Holdings – is also doing more in semiconductors.
He went on: “Semiconductors are a supporting act for our electronic businesses – we build semiconductors because they allow us to build better electronic products… we do also sell some semiconductors ourselves – these are 50 cent chips, compared to $50 boards, but in terms of unit sales, this might be the year when we cross over from doing more chips than we do boards.”
Vital to how Raspberry Pi is viewed by investors in the near term will, of course, be hitting its numbers – something that, for example, CAB Payments spectacularly failed to do in short order.
The shareholder base Raspberry Pi has built, though, should work to its advantage. Its existing investors will continue to own some 67% of the business, the biggest of which is the Raspberry Pi Foundation, which was founded to promote computer science education for young people. It has committed to remain a long-term investor.
Others clearly in it for the long run are Arm Technology Investments 2 Ltd, part of Arm Holdings and the hedge fund manager Lansdowne Partners, both of which invested in the IPO, which was co-ordinated by the investment banks Peel Hunt and Jefferies International. Sony’s semiconductor arm is also an investor – while Raspberry Pi’s employee incentive scheme owns around 13.6% of the business. All of this limits the number of ‘loose’ shareholders likely to cut and run should the company miss its sales and profit targets in the short term.
One swallow does not make a summer, of course, but this is nonetheless a hopeful omen for the UK market.
All attention now turns to whether the Chinese fast-fashion giant Shein chooses to list in London – and, if it does, the reception it receives from investors.
