OPINION – A US IPO is no silver bullet for UK companiesIn his late 1980s hit “Englishman in New York”, Sting repeated the line: “Be yourself, no matter what they say.” Middle-aged chairs and chief executives of UK companies who grew up listening to Sting may be tempted to take his advice and assume that US stock markets will accept them – and their companies – for what they are. But history tells us this is often not the case. They need something that makes them stand out. The truth is that for every wild success, like the IPO of chip designer Arm Holdings, there are plenty of damp squibs like the recent listing of financial brokerage firm Marex. The companies have some similarities – UK companies coming out of private equity ownership with stock overhang – but their stories are very different. It isn’t just about the usual litany of grievances about UK stock markets. Yes, there is the low allocation by local pension funds to UK equities, dour UK investors and something of a "bah humbug" attitude to success. And yes, this contrasts with America’s deep pool of institutional money, higher retail participation in stocks and a “fail fast, fail often” attitude, with the consequence that US stock markets have higher valuations and greater liquidity. But not every failed UK IPO or major discount to US peers can be blamed on the structural weakness of the UK market. Where an equity story is compelling, there is a history of international investors arbitraging the valuation gaps between US and European stocks. One FTSE 100 leader combining good growth, deep moats and an analogue to digital shift is data giant RELX. Its share price has risen by 250% over the past decade. Contrast that with oil major Shell, which has seen lower growth, a muddled strategy and a higher proportion of profits from volatile, low multiple trading relative to its US peers. Its valuation, in other words, is not just – or even primarily – a function of where it is listed. Which brings us to IPOs of private companies. These are beasts distinct from those companies already listed on the UK stock market that have a proportion of US revenues and existing US shareholders. Instead, these deals involve introducing new equity stories and management teams to investors. US IPOs are open to a large swath of investors, but it is a crowded market in which you are fighting for the attention of active institutional investors, passive trackers and retail investors. Arm listed in September on Nasdaq at a valuation of US$54.5bn. This was at the top of its indicative range and the share price still rallied 25% on its opening day. Its market capitalisation peaked at US$150bn in mid-February and is now around US$118bn with a heady price-to-earnings multiple of 74 times to its financial year-end in March 2025. Marex was reported to be targeting a valuation as high as US$2.8bn when it filed for a Nasdaq IPO in December. Following investor soundings, it announced an IPO range of US$18–$21 per share, equivalent to a market capitalisation of US$1.5bn at the high end. The deal priced at US$19 per share and the share price has barely moved. This implies a valuation multiple of eight times 2024 earnings. Marex had grown revenues by a 52% compound annual growth rate from 2021 to 2023, including an organic growth rate of 24%. This was much faster than the 5% revenue growth of UK-listed broker TP ICAP during the same period. However, the valuation multiples of the two businesses are almost identical. Why did Arm soar and Marex stall? Arm had been listed in the UK for decades at a much lower valuation multiple and delisted in 2016 following its acquisition by Softbank. But, more importantly, the 2023 IPO ticked all the boxes that US investors like – it is a large-cap, liquid, well-known tech business with high barriers to entry and scalable, recurring revenues and an AI theme. Marex, by contrast, is a mid-cap stock, an unfamiliar brand with a business mod
Bellwether