U.K. Tech Firms Looking Across The Atlantic for Growth

Adaptimmune Ltd, a U.K. biotechnology company that is working on treatments that use a patient’s own immune system to combat cancer, raised $191 million from an initial public offering of shares priced at the top end of expectations on Tuesday last week. After an initial pop, shares are currently trading flat from the offer price.

Cause for celebration in the U.K. you might think. Based in Oxford and backed by Oxford University, Adaptimmune is just the sort of high-tech business that the U.K. government and the London Stock Exchange Group PLC want to see going public.

But they were not cracking open the champagne at the LSE. The reason? Adaptimmune turned its back on London and opted to list its shares on New York’s Nasdaq instead.

It is not alone. Nasdaq said that five other U.K. high-growth companies had gained a primary listing on its market over the last two years raising $2.16 billion. In addition, King Digital Entertainment PLC, a mobile-game maker headquartered in Dublin, Ireland, raised $500 million in an IPO on the New York Stock Exchange last year.

The LSE still attracts a significant number of tech firms. The exchange said that 68 technology companies went public in London over the last two years raising $5.9 billion. Last week, U.S. biotech firm Verseon did the opposite, listing on the LSE.

However Xavier Rolet, chief executive of the LSE, believes one of the reasons some U.K. technology companies chose to IPO in New York is that they have raised early stage funding in the U.S., which has a much bigger pool of venture capital than the U.K.

“There is a huge deficit of venture capital dedicated to start-ups. A lot of European capital that goes into start-ups is given to U.S. money managers who have been doing it since the mid-1980s. The U.K. only started doing it in the last few years,” he said in an interview.

If companies raise venture capital from U.S. funds, when it comes time for them to IPO their investors often prefer for them to list their shares on a U.S. exchange. Adaptimmune last year raised $104 million from mainly U.S. investors.

Another IPO that the LSE looks set to miss out on is Graphene Lighting, a spin-out from the U.K.’s Manchester University that is planning to make light bulbs using graphene, a type of carbon that has extraordinary physical properties.

The U.K. government has been a high profile champion of Manchester University’s work on the development of graphene which it hopes will bring economic benefits to the U.K. But when it came to venture capital funding, Graphene Lighting found it could raise the money more easily in Canada than in the U.K. So it plans to go public on a Canadian stock exchange, according to Colin Bailey, Manchester University’s deputy vice-chancellor who sits on the company’s board.

Mr. Rolet says that the venture capital industry is growing in Europe, particularly in the U.K., but has a long way to go. “It is the story of Europe. It is not something that can be fixed quickly. It will take years to remedy.” The success of companies such as Adaptimmune might just speed up the process.