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Chip maker Alphawave tumbles 20% in £3.1bn London market debut

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·Contributor
·3-min read
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The Toronto-based company, which was founded in 2017, licences its high-speed data transmission technology to chipmakers and receives a royalty on every chip produced.
Alphawave licences its high-speed data transmission technology to chipmakers and receives a royalty on every chip produced. Photo: Getty

Canadian computer chip designer Alphawave (AWE.L) saw over half a billion pounds wiped off its value on Thursday as the company's IPO went array. 

Shares in Alphawave slumped 20% on its London stock market debut, giving the firm a market cap of around £2.23bn ($3.13bn), down from the initial value of £3.1bn.

The company, which shunned a listing on the tech-heavy Nasdaq index (^IXIC) in New York, had set a price of 410p per share for its float. 

Shares fell as low at 310p on Thursday. It coincided with a wider stock market sell-off.

Shares slumped as much as 18% on opening. Chart: Yahoo Finance.
Shares slumped as much as 18% on opening. Chart: Yahoo Finance.

Alphawave is the second high profile tech company to see its shares crash in London this year. Deliveroo's (ROO.L) shares plummeted 30% during its IPO, wiping more than £2bn off the company’s value.

"Another poor start for a high profile flotation, and one that comes so soon after Deliveroo, will inevitably be used as a stick with which to beat the London Stock Exchange and the London market more widely, amid accusations that the UK investment community doesn’t ‘get’ technology or like entrepreneurs," said Russ Mould, AJ Bell investment director.

The UK government has been pushing to make Britain's stock market more attractive to technology companies and is pushing through changes to make London more competitive.

The reforms have helped usher in a string of recent tech floats. Notable examples include cybersecurity company Darktrace (DARK.L), Moonpig (MOON.L) and review website Trustpilot (TRST.L). Darktrace, which uses artificial intelligence (AI) technology to spot cyber threats for businesses, saw its shares rocket on their debut.

Watch: Intel has 'some challenging times ahead' amid chip shortage

Read more: IPO boom powers London Stock Exchange to best first quarter in 15 years

Mould said Alphawave's poor performance was down to "sheer bad luck".

"Global markets are suffering their first stumble for some time, owing to unrest in the Middle East, fears of inflation and ongoing concerns over what could be an uneven global recovery in light of India’s ongoing woes and outbreaks of COVID-19 in Taiwan," he said.

Toronto-based Alphawave, which was founded in 2017, licences its high-speed data transmission technology to chipmakers and receives a royalty on every chip produced.

Alphawave has moved its headquarters to the UK as part of its listing. It also plans to open a research and development (R&D) centre in Cambridge, which is the birthplace of many of the UK’s biggest chip companies including Arm and Infineon.

“London was the obvious venue for the listing of our silicon IP business because both the industry and the business model were born in the UK,” John Lofton Holt, executive chairman of Alphawave IP, said.

“We are pleased to have executed against our IPO plans successfully, ahead of schedule and supported by a strong UK investor base, alongside a distinguished list of blue-chip investors across the US, Canada and Europe.”

Read more: Deliveroo blunder doesn't stop $4.5bn Alphawave IPO in London

Investment management firms BlackRock and Janus Henderson provided cornerstone backing, with both agreeing to buy $510m (£363m) stakes in the business.

Alphawave predicts the market for its products will grow to $1.5bn in 2025, up from $500m in 2020. The market for future products could surpass $50bn by 2024.

Revenue last year was $32.8m, up 200% year-on-year since 2018. Operating profit grew by 207% on the same basis to $17.5m.

Watch: What are SPACs?

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