Semiconductor group Alphawave IP to seek $4.5bn valuation in London IPO

Canadian chip developer Alphawave IP has chosen to float its shares in London rather than on rival bourses in New York and Toronto as it seeks to obtain a valuation of about $4.5bn in an initial public offering.

The company, founded only four years ago, develops chip technology that pushes data through data centres and phone networks. It intends to raise more than $500m via a listing in London and set up a research centre in Cambridge, the heart of Britain’s semiconductor industry known as “Silicon Fen”, as part of its expansion.

The company will move its headquarters to the UK as part of the float, providing a significant boost to the government’s ambitions to attract more technology businesses to Britain.

BlackRock and Janus Henderson have agreed to buy $510m of shares at an equity valuation of up to $4.5bn. The company will sell at least a quarter of its shares as part of the proposed deal.

The potential IPO will breathe life into the UK-listed technology sector and provide a boost to the London markets. The collapse in value of Deliveroo, which floated in London last month, had cast doubt on the London market’s ability to attract other technology business.

John Lofton Holt, chair of Alphawave IP, said there had been an internal debate within the company about whether to float the business on New York’s Nasdaq or in Toronto, but opted for London due to the country’s strong heritage in developing chip technology that is then licensed to manufacturers. “Silicon IP (intellectual property) was born in the UK and investors really understand that,” he said.

Tony Pialis, chief executive of Alphawave IP, said the company was not deterred by the aftermath of the Deliveroo float. “What we build is part of computer chips. We are critical to communications. We didn’t pause at all given what happened with Deliveroo,” he added.

“We’re coming to the UK. There’s no reverse course,” he said of the decision to headquarter the business in Britain.

Unlike Deliveroo, Alphawave IP will have only one class of share. It is the second large UK technology listing to be announced after Darktrace, the cyber security company, unveiled its float plans.

The London markets once had a thriving listed chip sector but companies such as Arm Holdings, Imagination Technologies, Wolfson Microelectronics and CSR were all sold to trade rivals or financial buyers.

Alphawave IP is an obscure name even in the semiconductor world with a number of veterans of the UK sector unaware of the business. It specialises in developing digital signal processing chip technology that is used to transit data over wired networks. Like Arm and Imagination, it is an IP company in that it designs semiconductor technology and then licenses it to other chip businesses. It makes money upfront on the licence and then gets a royalty when products using its chip designs are sold.

Pialis said that with the amount of data growing rapidly as networks expand, the connectivity segment is the fastest growing part of the semiconductor market. Its market segment is in the “wired” part of the network — the cables that connect servers in data centres to optical fibre networks — which is a crucial component of the global communications network.

Russ Mould, investment director at AJ Bell, said: “The global silicon chip industry is booming, British investors are on the lookout for hot technology stocks and the UK government’s examination of Nvidia’s planned purchase of Arm — a company which has the same operating model as Alphawave IP — highlights the importance of the semiconductor industry to the economy, both here in Britain and worldwide.”

Barclays and JPMorgan are acting as joint co-ordinators and bookmakers alongside BMO Capital Markets.

Lofton Holt is also chair of Achronix, a US-based chip developer, that is floating on Nasdaq via a merger with a special purpose acquisition vehicle later this year at an equity value of more than $2bn. BlackRock has also invested in that company.