A GBP4bn UK ‘mini Tesla’ choosing to list stock in US is worrying


Right on cue, here comes a GBP4bn stock market listing of a young and exciting UK electric vehicle company – a mini Tesla, if you wish. It’s just the thing for ministers to crow about, you might think: evidence that the UK possesses a few fast-growing tech innovators capable of injecting oomph into the government’s loose 10-point sketch for a green revolution.

There’s just one drawback. Arrival, with its head office in London and operations in Oxfordshire, will not be arriving on the London Stock Exchange. It is listing in New York on Nasdaq, via injection into one of those special purpose acquisition companies, or SPACs, that are all the rage on Wall Street this year.

From Arrival’s point of view, you can understand why it chose the US. Tesla’s gravitational pull is strong. The pool of investors wanting to punt on electric vehicle firms is bigger.

And, since Arrival intends to plant its decentralised “microfactories” around the world, the international profile that comes with a US listing helps. It adds to the backing Arrival has already received from Korean carmakers Hyundai and Kia.

The appeal of the SPAC model is also easy to explain. This is the structure whereby investors put up capital and then look for a target to buy. Critics deride it as “blank cheque” investing but the acquired companies – in this case, Arrival – get speed and, potentially, long-term partners.

Arrival likes the look of the financial backers assembled by Peter Cuneo, a former chief executive of the Marvel Comics company. Now a listing, and $660m (GBP500m) of fresh capital, will be achieved in early 2021 without fuss.

One response is to shrug and say that Arrival’s choice of stock market home doesn’t matter. The company will keep its headquarters in the UK and sustain its research and development budget, currently GBP80m-GBP100m a year, here. It can play its part in the green push. What’s the problem?

It’s this: a vibrant, buzzy stock market for technology companies is a very useful asset if, like the UK, you need vast quantities of private capital to make your green revolution happen. It draws in investors and expertise and makes the process run more smoothly.

London’s stock market already risked looking leaden-footed on the green tech front but the SPAC factor from the US is new. Purists can decry SPACs as a governance abomination (scrutiny is minimal) but we’ll be less relaxed if US investors use the fast and loose approach to shop around the world, including in the UK, for the most interesting tech firms.

SPACs are possible in the UK – indeed, they’ve been used. But the structure is clunkier. For starters, deals are regarded as reverse takeovers under Financial Conduct Authority’s listing rules, which slows the process. Third-party investors also don’t get the same rights of refusal on a proposed acquisition, which lessens the appeal for them.

There is a potential problem here – and the UK’s financial establishment seems to sense it. When Rishi Sunak, the chancellor, briefly mentioned a taskforce to reform the UK listings regime during his “green gilt” speech last week, David Schwimmer, chief executive of the London Stock Exchange Group, leaped on the line. He’s keen for “swift action … to further enhance London’s reputation as a competitive and innovative place to list and raise capital”.

You can’t blame him. Arrival is only one company but, with a GBP4.1bn valuation, it would have been a short hop away from the FTSE 100 index if it had a premium listing in London. So much for the prestige of Footsie status. Instead, a US-style SPAC, seen as faddish only a year ago, got the gig. It’s a worry.

Stephen Hester, chief executive of RSA, can count it as a successful innings. His shareholders will be happy with a GBP7.2bn takeover of the ancient insurer by Intact, of Canada, and Tryg, of Denmark – the premium is 50%.

He will land a payday of up to GBP16m for himself on completion. And, since RSA is infinitely less exciting than post-crash Royal Bank of Scotland, his last outing, the popular prints have had fewer occasions to use that picture of him on horseback.

What’ll he do next? “Lady Luck normally comes up with a future for you which isn’t the one you expected,” he said.

OK, but he’s been chief executive of three FTSE 100 companies (the other one was British Land) and is still only 59. A fourth outing – possibly never done by anyone before – must be a possibility.


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