Cleo, a London-based artificial intelligence-powered fintech business, is considering a flotation.
Yet if the London Stock Exchange, City regulators and the government hope that Cleo’s plans could provide a much-needed boost for the nation’s beleaguered public markets, the company’s founder has some bad news.
Barney Hussey-Yeo, who set the company up in 2016 and has built it to a valuation of more than $1 billion, says the LSE is simply “not fit for purpose for a tech company”.
Cleo provides an AI financial assistant.
It has 350 staff and makes all its revenues in the United States but is planning to open for customers in the UK next year. The company is understood to have spoken to Goldman Sachs and JP Morgan, the investment banks, about a potential initial public offering.
When it comes to a listing, it is most likely to follow counterparts such as Arm, the chip designer, and, more recently, Wise in looking to the US. “For this generation of companies, unless something drastic happens,” Hussey- Yeo says, “all of our tech champions are going to be on Nasdaq and increasingly US-owned and operated.”
Hussey-Yeo, who grew up in Sheffield, is dismayed by the situation he describes. He has been lobbying the government to make much more ambitious reforms to market rules and the tax regime to tackle it.
“As a British-founded business, you would hope we would list here, scale here, hire British staff, have the British public invest. It’s a real travesty that the fastest-growing and the best companies [are leaving]. If you’re successful as a British company you become an American company.”
This is a crunch moment for the City of London. A string of public companies, including Wise, the money transfer business, have decided to move their main listing from London to New York in recent years and a dearth of new companies joining the British exchange since the last flotations boom in 2021 has raised fears about the health of the UK stock market.
The privately-owned financial services group Revolut, which is the crown jewel of Britain’s fintech industry, valued at $75 billion, has also hinted it is more likely to go public in the US rather than the UK, while Monzo, the London-based online bank, has debated whether to list in New York or in its home market of the UK when it eventually pursues a flotation.
“There’s no way Revolut lists here, there’s no way Cleo lists here, even Monzo, which has a UK customer base and a great UK brand, probably won’t list here,” says Hussey-Yeo.
This is despite the government and the Financial Conduct Authority, spurred on by the LSE, pushing through a string of rule changes in recent years, including the biggest reform to the listings regime for decades in July 2024, to boost the appeal of the London market and encourage more companies to list.
Hussey-Yeo says it’s not enough. “If you look at listing rules, it’s still way more prohibitive than the US. We need to be competing with, and out-competing, the US [on this] and we’re actually behind them. And then we have these self-inflicted wounds like stamp duty [on shares]. It makes no sense to reduce liquidity with stamp duty.”
He adds that a recent City agreement dubbed the Mansion House Accord, in which British pension providers pledged to invest more in private UK businesses and venture capital and ultimately boost British flotation candidates, is “too weak and coming too late”.
“It’s not being pushed aggressively enough by the chancellor. You have to have ten [times] the ambition of that. It has to come before the next election.”
So far, the listing rules changes have failed to stoke a revival. By this month, there had been 12 IPOs in London this year that raised a combined £199 million, the lowest for the period since at least 2000, according to data compiled by the LSE.
With flotation activity in other markets around the world picking up again after the usual summer lull, pressure is mounting on London to put an end to its dry spell and show it can still attract blockbuster flotations.
In New York the autumn window for deals opened with a bang this month with the $20 billion debut of Klarna, the Swedish buy now, pay later business.
On Friday SMG Swiss Marketplace Group pulled off Europe’s biggest IPO so far this year after it listed its shares in Zurich in a deal that valued the company at 4.5 billion Swiss francs (£4.2 billion).
Verisure, the Swedish maker of home alarm systems, has announced plans to raise about $3.7 billion from a flotation in Stockholm.
If Britain could follow suit with a string of well-received listings over the coming months, it would do much to dispel fears that the London market cannot compete with its rivals in New York and Europe.
One leading lawyer who works on share sales in London said it was “unquestionably” getting busier and that his firm was “in the execution phase of a number of transactions, which is very different from even six months ago”.
These are deals that are likely to come to the UK market next spring, so there is a risk events conspire against them.
“In the past few years, when we approach an IPO window there always seems to be something that happens to derail it,” the lawyer said, ranging from Russia’s invasion of Ukraine in 2022 and the collapse of Silicon Valley Bank in 2023 to the market shock caused by President Trump’s tariffs in April. “So I’m approaching all of this with a healthy dose of scepticism.”
Even so, there are tentative signs of life in the London market.
Beauty Tech, a Cheshire-based maker of cosmetics devices, confirmed this month that it would attempt a UK listing in a share sale that, if successful, would effectively open the autumn IPO window for London. Any deal is likely to be modest in size, however, with a rumoured target of about £350 million.
A bigger IPO could come from Shawbrook, a specialist lender that is understood to be in the advanced stages of preparing for a London flotation.
A listing of the bank, which is owned by the private equity firms Pollen Street and BC Partners, could put a £2 billion price tag on the group. A flotation has been on the cards for years but Shawbrook’s planning has intensified in recent months after it appointed an army of investment bankers to work on a share sale.
Another possible candidate is Ebury, the payments business backed by Santander.
The company had been readying for a London IPO in the spring until turmoil in the global markets forced it to put its plans on hold. There are rumours it might revive the initiative and, like Shawbrook, a valuation of about £2 billion has been mooted.
The pipeline for next year is growing, too, although none of these deals is a certainty. Visma, a Norwegian supplier of tax and accounting software that is owned by British private equity firm Hg, is eyeing a flotation and its preferred listing venue is London.
This would be a coup for Britain, which is often shunned by big tech companies looking to list, and would be a blockbuster deal: Visma was valued at €19 billion during a funding round two years ago. The company has not yet decided definitively on London, however, and Amsterdam is being considered as an alternative.
Similarly, the British payments group SumUp is understood to be in the early stages of planning a $15 billion IPO next year and is considering listing in London or New York.
“I’m cautiously optimistic,” one top equity markets banker said.
Even Hussey-Yeo has not quite given up on London. Changes such as a further revamp to listing rules to attract founding entrepreneurs, stamp duty relief for tech companies, capital gains incentives for entrepreneurs and a government mandate for pension funds to invest in venture capital could turn things around, he says.
“If you gave something [to] founders to build here, list here, stay here that would have a massive effect on where they decided to list,” he says.
“This budget could be really positive. If I was going to change things, I would really focus on public markets. The chancellor has this moment to do something really positive to get the LSE working.
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