Alphawave IP, a Canadian microchip technology develop, has opted for a London IPO that will also see it set up a new R&D base in the ‘Silicon Fen’ semiconductor cluster around Cambridge. Founded just four years go the start-up has set a $4.5 billion valuation already backed by cornerstone investors committed to the IPO. It plans to raise over $500 million by selling new shares via the listing.
As well as being a boost for the London Stock Exchange, which has been making a concerted effort to attract technology companies to the City by bringing in several significant rule changes designed to appeal to fast-growth companies from the sector, it will also be a positive development for Cambridge. It is believed the investment could result in up to 100 new highly skilled jobs in Cambridge, with the city and surrounding region attractive due to its “deep pool of knowledge, experience and talent”, in the semiconductor industry.
Alphawave opted for a London listing despite also considering the merits of rivals including the Nasdaq and Toronto Stock Exchange. However, the company said London was quickly settled on as the exchange of choice. The company also dismissed fears the market for IPO has peaked after a number of disappointing recent market debuts, including that of Deliveroo on the London Stock Exchange. The company dismissed such concerns with the response “highly profitable companies will always have a good IPO window”.
Alphawave’s executive chairman John Holt commented he believes LSE investors are experienced in and understand intellectual property licensing, which was key to the choice of a London IPO ahead of other options considered. The reservoir of investor knowledge of the business model and sector is a result, said Mr Holt, of the fact the semiconductor technology development business model had been “invented by great British companies, such as Arm and Imagination”.
Alphawave’s chip technology is licensed by semiconductor manufacturers including Samsung and the Taiwan Semiconductor Manufacturing Company. The technology is used in semiconductors used to power international network and computer systems for data centres, 5G wireless infrastructure and futuristic technology like autonomous vehicles.
The fund managers BlackRock and Janus Henderson have already committed to buying a combined $510 million of Alphawave’s new shares at a valuation of up to $4.5 billion. The start-up will list at least 25% of its shares publically via the float with some existing shareholders cashing in part of their stakes.
Alphawave chief executive Tony Pialis says the company’s chip technology allows data to be transferred more quickly and reliably, with the movement also requiring less power. The chip designs are licensed by manufacturers who want
“to enable their chips to communicate with each other . . . and to handle the massive amounts of data transmission that happen across all our connected infrastructure”.
There is currently an international shortage of microchips as a result in a surge in demand thanks to the rapidly increasing number of devices containing them, from connected kitchen appliances to doorbells as well as smartphones, laptops, tablets, televisions and cloud-hosted software. The automotive sector, which is using increasingly sophisticated electronics, is being particularly badly hit with chip shortages delaying production lines.
Alphawave believes the shortage is a short-term issue mainly the result of Covid-19 pandemic-related supply line disruption. It sees strong long-term demand as presenting opportunities for it to increase its product range, with its target market forecast to exceed a value of over $50 billion by 2024.
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