Computer chip technology developer Alphawave IP (AWE) saw its shares slump nearly 19% on their London market debut, wiping close to £550 million off its market valuation. At 10.30am, the stock was trading at 332.55p.
The Toronto-based company and founding shareholders has sold £856 million of shares at 410p each, in the middle of a previously announced price range of 375p and 430p per share, valuing the business at £3.1 billion. Alphawave sold £360 million in new shares while existing equity holders sold down shares worth £496 million, listing about 28% of the business.
INVESTORS LURED IN BY GROWTH
Investors had become excited about the London listing because of its rapid growth potential and similarities to UK chip design champion ARM, who pioneered the microchips-based licences and royalties model used by Alphawave. ARM was a hugely popular holding for thousands of UK investors thanks to its decades-long growth track record, but the company was sold to Japan’s Softbank for £32.3 billion in 2016.
Toronto-based Alphawave designs high-speed data transmission technology and then licences it to semiconductor designers and manufacturers, who then pay a royalty fee for every microchip produced.
Global microchip sales rose 6.5% in 2020, according to the Semiconductor Industry Association, to $439 billion, and increased 3.6% in the first quarter of 2021.
BlackRock and Janus Henderson were cornerstone investors in the Alphawave listing, subscribing to about £280 million and £85 million of shares respectively.
BROADER MARKET SELL-OFF
The slump comes amid a broader tech stock sell-off and only weeks after food delivery firm Deliveroo fell by as much as 30% on its stock market debut, potentially hurting the London market's ambitions to attract fast-growing tech companies.
‘Yesterday’s US inflation shock fuelled the growing belief that central banks will have to take action sooner rather than later when it comes to raising interest rates,’ said AJ Bell’s investment director Russ Mould. ‘The world wanted economic recovery, but it appears to be happening too fast and the actions required to cool it down aren’t favourable to stock markets.’
