Fast-growing European technology and biotech firms need to float in New York because investors on this side of the Atlantic are “not bullish enough to give them the right valuations”.
That’s according to Adam Kostyal, head of European listings at Nasdaq OMX, the US exchange that has floated several British companies, including the financial information firm Markit and the biotech outfit Oxford Immunotec, in the past year.
“If you take a company that has not shown bottom-line growth, there’s a typical view in Europe that is conservative,” said Mr Kostyal. “In the US they’re more interested in scalability and they’re more willing to invest. In Europe they’re not bullish enough to give them the right valuations.”
Mr Kostyal claimed part of the reason why European and Middle Eastern companies are looking to the US is that a lot of their early investors have been American as there is “a lack of venture-capital money in Europe”.
Nasdaq bought the Nordic exchange OMX in 2008 as it sought to woo European listings. But the London Stock Exchange has raised its game by easing listing rules for fast-growth companies, and Mr Kostyal admitted that “the competition is fierce” with both the LSE and the Nasdaq’s local rival, the New York Stock Exchange.
Earlier this year, the NYSE won the British games business King Digital, maker of Candy Crush Saga, despite Nasdaq’s tech-heavy reputation. The NYSE also picked up the high-profile flotation of Twitter last year, after Nasdaq’s troubled float of Facebook in 2012, when there were technical glitches.
Mr Kostyal said Nasdaq does not just face competition from rival stock exchanges; big tech businesses and private equity players have been buying fast-growing companies. However, he added that the float market has improved from the “dismal” days of the credit crunch.
Seventeen British companies are listed on Nasdaq, including the FTSE 100 giants Vodafone, WPP and Arm, which have dual listings through American depositary receipts. Ryanair is one of a dozen Irish businesses on Nasdaq – also with a dual listing.
The largest number of overseas companies on the exchange are Chinese, around 120, and Israeli, around 80.
Last October the LSE unveiled what it called the “Future Fifty” – a list of 50 high-growth, largely British companies to which it would provide special “concierge” support in a drive to help them grow or float in London, rather than move abroad.
The takeaway food website Just Eat and property listings firm Zoopla are two leading Future Fifty members that have already floated on the LSE this year.
Some UK analysts have raised concerns about easing listing rules, such as reducing the amount of shares that have been sold.
The Israeli digital advertising firm Matomy Media had to pull its initial plans to float in London earlier this year due to lack of investor appetite, but finally debuted last month.