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: Chip maker Alphawave tumbles on London debut after raising $1.2 billion in IPO

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Shares in chip maker Alphawave IP slumped 20% in early trading, after the Canadian company raised £856 million ($1.2 billion) in its London initial public offering.

The Toronto and London-based semiconductor developer priced shares at 410 pence, giving the company a market cap of £3.1 billion, it said early on Thursday. However, more than three hours into trading the shares had fallen 20.2% to 327 pence, despite the IPO being seen as well-timed by some analysts due to the global chip shortage.

The company’s difficult debut comes in a bad week for technology stocks, which were hammered on Wednesday after U.S. inflation in the year to April climbed at its fastest pace in nearly 13 years. The tech-heavy Nasdaq Composite
COMP,
+0.76%

tumbled 2.7% on Wednesday and futures
NQ00,
+1.02%

pointed lower early on Thursday.

“The finger-pointing will now doubtless begin, as the company, advisers, investors and onlookers try to work out why Alphawave IP’s shares are sinking quite so fast, even though the global semiconductor industry seems to be booming right now and the company has a business model which looks perfect to capitalize upon demand for silicon chips over the long term as well,” said AJ Bell investment director Russ Mould.

“As it turns out, through sheer bad luck, Alphawave IP is coming to market in a volatile week,” he added.

It could also come as another blow for London in its efforts to attract major tech IPOs, after shares in food-delivery company Deliveroo
ROO,
-2.17%

fell by almost a third on its debut in March.

The government has been on a drive to make the U.K. a more attractive home for tech companies, including making changes to listing rules, allowing London to better compete with the likes of New York as a global financial center.

Read: London set to overhaul listing rules to attract tech IPOs and cash in on blank-check boom

Alongside making the rare move across the Atlantic to float — shunning a listing on the Nasdaq — Alphawave will provide a boost for the U.K. by setting up a Cambridge, U.K. research and development headquarters.

Alphawave’s decision to set up shop in Cambridge would put it in the backyard of Arm, a leading chip designer that was bought by graphics microchip maker Nvidia
NVDA,
-0.55%

 last year in a $40 billion deal currently facing a national security probe

The company said it raised £360 million from selling new shares as part of the IPO, with the remainder from shares sold by existing shareholders. 

Most of the proceeds from its share issue will go toward growing the group’s global offering to expand revenue streams, as well as servicing customer demand through licensing and manufacturing capabilities, Alphawave said. It also plans to use proceeds to scale its team globally and attract more customers.

Individual investors weren’t invited to participate in the IPO, but will be able to buy Alphawave stock when unconditional trading begins, expected on May 18.

Founded in 2017, Alphawave is a semiconductor developer with a focus on efficient, high-speed and high-volume data connectivity, building chips to handle the exponential growth of data processing in networks and infrastructure. Its chips are used to push data through computer systems, phone networks, and data centers while using relatively low power, and its tech has applications across 5G wireless infrastructure, artificial intelligence and autonomous vehicles.

“Our technology helps chips communicate with each other, and our innovative approach has quickly made us a leader in the market by enabling data to travel faster, more reliably and using lower power,” said Tony Pialis, the group’s president and chief executive.

Analyst Susannah Streeter, from broker Hargreaves Lansdown, said on Wednesday that Alphawave’s decision to go public was well-timed amid the global shortage of semiconductors.

“Alphawave may be more of a niche player in the industry, developing a small part of the technology, but its launch comes at a time when companies are crying out for better connectivity to adapt to the new digital world and deal with an exponential increase in data,” Streeter said.

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