One of the UK’s brightest technology stars today said it was seriously considering ditching its London Stock Exchange listing and move its shares to the US because British investors did not have enough understanding of tech.
Blue Prism chief executive and chairman Jason Kingdon said his £1.3 billion AI company could be worth two-to-five times more if it was listed in the US, and its share price would be far less volatile, with a deeper volume of shares and more investors to hold them there.
He was speaking after Blue Prism’s shares crashed 25% on the back of a trading update several analysts said showed a creditable performance.
“I have to say,” said Kingdon, “the reaction today just proves what I’m talking about. We’ve reported a fifth year in row of 40%-plus growth, we launched nine products in the market last year, and this is the reaction we get.”
Blue Prism is a pioneer in the world of so-called robotic process automation – where robot workers take over dull administrative tasks.
It sells its automation software in 170 countries and had £141 million of revenue in 2020 with a strong improvement in cash generation during the second half of the year. Customers range from eBay and Siemens to John Lewis.
Today’s shares sell-off appears to have been because the market was disappointed at Blue Prism’s guidance for the coming year. A wide range of expectations had built up since the company suspended forecasts last Spring due to Covid-19 uncertainty.
Another factor hitting the shares appeared to be a reassessment of the way its new auditors, Grant Thornton, accounts for its licence revenues compared with its former auditor BDO.
Kingdon said: “This is a highly technical issue but people should be able to judge that this is just something for the accountants to worry about. What really matters is cash, the way licences are paid for.”
He added: “And this is what we don’t get [in the UK]. That ability to be able to look at a tech company and judge a good one from a bad one.”
In some tech companies whose performance is largely measured by its revenue growth, executives have been tempted to boost revenues by pushing through lower margin or even loss making products, but that was not the case with Blue Prism.
Kingdon stressed that 95%-98% of the licences for its products were not from low margins and services.
He said the amount of tech investment in the UK meant not enough shares of companies were bought and sold, unlike in the US. That lack of liquidity leads to wild price movements as sellers struggle to find buyers and vice versa: “London is a thinly traded market, where every reaction is over exaggerated," Kingdon said.
Blue Prism listed its shares on the junior AIM market of the London Stock Exchange rather than on the main exchange and he conceded that this might be a factor in the group’s lack of widespread appeal.
A move up to the main market in London was “not beyond the realms of possibility”, as well as a switch to the US or some form of dual listing.
He said: “I think [the authorities] need to address the volume question and need to address the way trading is managed in this thin market.”
Kingdon is a high profile face on the London tech entrepreneur community and his words will appal those in the City who are keen to encourage more technology-led companies to float here.
Online giftcards retailer Moonpig announced plans for a London float this week, and others such as Deliveroo and Darktrace are set to follow.
“I have been involved in emerging tech start ups in and around London for many years,” said Kingdon.
“There was a period where the UK public markets looked like they could play a role but… [now] it is hard to find the specialisms in the market to get the support.
“It kind of says, the old rules apply: if you are a global operation, you go straight to the US.”
He acknowledged that the London market had helped Blue Prism build an industry for robotic process automation in the company’s early years.
“It played a role, but there are things for people to worry about in all this stuff. They need to think about London’s image. Structural questions just have to be faced up to.”
“Dollar for dollar comparisons between our valuation and our US [peers] show they are at 2-5 times multiples of us. Investors here just don’t understand us and it is a more thinly traded market. There’s a lack of understanding of tech businesses.”
Kingdon is a mathematician and computer scientist and has co-founded several AI companies. He was a founder of University College London’s Intelligent Systems Lab and set up and run Searchspace, which pioneered using AI to detect moneylaundering and insider dealing at financial firms.
The UK government has pledged to encourage more tech firms to float shares in London and is reviewing the rules for companies listing here to make it possible for founders to retain a “golden share” blocking unwanted takeovers.
News of the frustration of such a high profile UK player is likely to alarm an administration hoping tech floats will help drive Britain’s recovery from Brexit.