First Deliveroo, then Darktrace, now Alphawave IP. This year is shaping up nicely for tech-related companies to announce London floats. The City has not even loosened up its listing regime yet.
Alphawave IP will be an unfamiliar name to many UK investors. But they will applaud its sangfroid in ignoring Deliveroo’s steep first-day drop and its self-denial in forswearing dual-class shares. Founded in Canada in 2017, the company sells wired connectivity designs for semiconductors. These can be used to run phone networks or data centres. Revenues come from the sale of licence fees.
Around the world, semiconductor sales are rising thanks to the recent pandemic-driven shift online. After a 12 per cent decline in 2019, total semiconductor revenue rose 10 per cent to $466bn last year, according to Gartner data. Alphawave IP claims that it operates in the fastest growing area of the semiconductor market.
Bookings from new contracts are certainly on a tear. The $82m in orders reported in the first quarter of 2021 beat projected revenues from contracts entered into over the whole of the previous year. Like British chip designer Arm, Alphawave IP’s royalties provide a steady, high margin stream of sales. About a tenth of the last quarter’s bookings were estimated royalties.
Half a billion dollars worth of cornerstone investment from BlackRock and Janus Henderson has pinned a $4.5bn post-money valuation on the company. Revenues of $33m in 2020 (also reported in Canadian dollars) mean that it is being valued at about 17 times trailing sales — similar to the level Arm traded at before SoftBank swooped in five years ago with an acquisition.
There is a chance that Alphawave IP might have bagged an even higher multiple in the frothy US market. This also offers a more accommodating listing environment — something the UK government is keen to replicate. But to meet the demand from its total addressable market and keep licence fees rising, Alphawave IP needs new designs and designers. As Citigroup’s Amit Harchandani points out, the fight for this talent is fierce.
By listing in the UK and using the proceeds to open a research centre in Arm’s home of Cambridge, Alphawave IP can raise both capital and its own profile.
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