Yahoo Finance Alphawave shares plunge in another disastrous London float
Shares in pioneering microchip designer Alphawave plunged on its first day of trading, leaving the company's bankers racing to blame rocky markets and inflation fears following another disastrous debut for a high-profile London float.
The business had priced its shares at 410p but they fell as much as as 24pc to 310p on Thursday, cutting its value by more than half a billion pounds. The float price had valued Alphawave at £3.1bn, handing a paper fortune to its founders.
The fall is particularly embarrassing for adviser JP Morgan, which also oversaw a much-hyped London listing by food delivery company Deliveroo that proved to be one of the worst stock market debuts on record. Senior banker Barry Meyers was named in float documents as having worked on both deals.
Insiders at the bank defended the Alphawave float, blaming the plunge on a broader sell-off in technology stocks that started on Wall Street amid concerns over higher inflation in the world's biggest economy.
Gavin Launder, a fund manager at Legal & General which decided not to back the float because of concerns over its valuation, said: “I didn’t think it would fall that sharply, but it has launched into a market where tech stocks are under pressure."
Global markets have wobbled this week, with the FTSE 100 falling as much as 2.5pc on Thursday before clawing back most of this lost ground to close down 0.6pc.
Founded just four years ago, Alphawave designs tiny semiconductor parts called chiplets that can double connection speeds. These chips make their way into data centres used by the likes of Amazon.
The young company only has 100 staff, mostly based in Canada, with a head office in London. It is planning to hire a team of up to 30 researchers in Cambridge as part of its UK expansion and has been hailed as a new jewel in the country's technology crown alongside fellow semiconductor stalwarts such as ARM Holdings.
John Lofton Holt, the company's 45-year-old executive chairman, said earlier this year that it had a “spirited debate” over whether to list in London, Toronto or New York. He said on Thursday that London was an obvious choice because the chipmaking industry was born in the UK.
The share fall is nonetheless likely to spark soul searching in London, which has struggled to attract tech firms because the industry has enjoyed more success when listing in New York, and is now planning to rewrite market rules in a bid to entice more companies.
Alphawave's woes undermine commentators who sought to dismiss the 26pc drop in Deliveroo shares on its maiden day of trading as a blip driven by doubts over the takeaway company's business model.
Nick O'Donnell, a partner at law firm Baker McKenzie, said: “For issuers that are sitting on the fence [about where to float] it will certainly be relevant and you can imagine it tipping the balance for some individual companies who need to make the call soon and for whom London is a less natural home."
Mr O'Donnell added that he believes the addition of Alphawave is still a good thing for the London market as it may help to attract similar businesses. He said: "This listing is a continuation of a good news story for the London initial public offering market - especially in the tech space, where having more peer companies is a real boon."
The share price drop also feeds into wider malaise over bets on tech amid fears of a dangerous bubble. America's technology-focused Nasdaq is down 6pc this month.
Britain's largest investment trust, Scottish Mortgage, revealed on Thursday that it has sold around 80pc of its Tesla shares over the last year and exited many other tech holdings as it looks for growth elsewhere.
The trust said it sold its stakes in Facebook and Google's parent company Alphabet, as well as reducing its shares in Amazon as it questioned how the big tech businesses can "retain their growth credentials at vast scale".
Manager James Anderson, one of the biggest and earliest investors in Tesla who is stepping down from Scottish Mortgages next year, also attacked the "near pornographic allure" of earnings announcements and macroeconomic headlines from his rivals.
He said that most investors "do not listen to experts" and instead "listen to brokers and the media, besotted as it is by fear mongering and the many short sellers".
Mr Anderson said: "The world of conventional investment management is irretrievably broken.
"It demands far in excess of the canonical 'six impossible things before breakfast' that Alice in Wonderland propounds."
The slump at Alphawave will cut the value of the holdings owned by its three founders, Tony Pialis, Jonathan Rogers and Raj Mahadevan,who each stood to make paper gains of hundreds of millions of pounds.
Alphawave sold new stock worth £360m while existing equity holders offloaded shares worth almost £500m, listing about 28pc of the business. Shares ended their first day on the stock exchange at 343p.
