Britain’s tech industry is not dead but needed a prod - and that’s what it's got from the listing today of Raspberry Pi reckon the pundits.
Shares in the entry-level computer maker soared 40% in conditional dealings from a listing price of 280p but look good value for it, suggested research house Third Bridge.
Raspberry Pi's revenue grew by 47% and profits soared by 85% in the year 22-23, the research house calculates, adding while that was phenomenal it is unlikely to continue at that pace.
“A more realistic yearly growth rate is around 20%. The strong performance in FY22-23 was driven by pent-up demand and a return to normal operations after pandemic-related supply chain issues,” it added.
“Raspberry Pi needs 30%-40% revenue growth to prove it's worth the IPO hype. Traditionally known as a low-cost solution, becoming a public company means they need to boost profitability and explore new revenue streams.”
“Our experts suggest that Raspberry Pi can use the proceeds from its IPO to reach the next level by launching higher-end corporate products and solutions, moving beyond its current focus on hobbyist and educational products.”
“Raspberry Pi's expectation of selling 8.4 million units in FY24 seems reasonable, considering it sold 7.4 million units in FY23.”
At AJ Bell, Dan Coatsworth adds that while Raspberry Pi might fall into smaller company territory, “this IPO is big from a strategic perspective”.
“It shows the UK is open for business to technology flotations and that investors are hungry for companies of any size if they tick the right boxes," he said.
“There is a widely held view that tech companies only float in the US where they can potentially get a higher valuation.
“Raspberry Pi is proof that the UK can still compete against the likes of the Nasdaq and attract home-grown champions.
“Raspberry Pi is a profitable, established name and not reliant on the ‘jam tomorrow’ story that often props up a lot of tech IPOs. It has a large community of users; it makes money rather than simply being a bright idea that is not yet commercialised.
" If the London Stock Exchange wants a new posterchild for how IPOs should play out and to attract others onto the market, Raspberry Pi is the one to hold up high.
“It’s great that retail investors had the opportunity to take part in Raspberry Pi’s IPO offer as the general public has historically been denied the chance to participate in most new listings, instead having to wait until the shares started trading.
“The more companies to go down this route, the better. It would show a level playing field and remove accusations that fund managers and other institutional investors are being given preferential treatment by being able to get in first.
“The share price reaction to Raspberry Pi’s listing implies that investors believe the company is worth a lot more than its IPO value."
According to AJ Bell, the average market cap for a company listing in London during 2023 was £98 million, £86 million in 2022, £383 million in 2021, £254 million in 2020 and £393 million in 2019.
Before Raspberry Pi floated, the average in 2024 was a mere £11 million.
“The biggest UK stock market flotation by market value since the start of 2019 was THG which floated in September 2020 in an IPO worth £5.8 billion.”
AJ Bell doesn’t say it, but THG is now worth £934 million.