Why Raspberry Pi’s IPO success bodes well for other tech firms listing in the UK

Investors of all shapes and sizes have feasted on a slice of Raspberry Pi in what is the most significant IPO for the London market for a long time. It may only fall into smaller company territory, but 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. 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; and there is a strong social angle as Raspberry Pi has education built into its business model.

The UK market is woefully under-represented in tech names and hopefully Raspberry Pi’s IPO success will open the flood gates for others in the sector to also float here. 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.

What does Raspberry Pi do?

Raspberry Pi designs and develops low-cost single board computers and compute modules for business use, as well as for educators and enthusiasts. Low price is an important part of its appeal to customers so any prospective investor should appreciate some of the key risks around the investment case. Any disruption to its supply chain could push up costs or restrict component availability – two factors which could lead to customers having to pay more for its kit.

It is also heavily reliant on a handful of partners, principally Broadcom as a component supplier and Sony as its biggest manufacturer. Any breakdown with these relationships could be catastrophic for the business.

How Raspberry Pi compares to other recent IPOs

Strong demand from institutional and retail investors to take part in Raspberry Pi’s IPO offer meant the stock was priced at the top end of its range. That valued Raspberry Pi at £542 million, making it the largest IPO on the UK stock market since July 2023 when CAB Payments listed at circa £850 million.

Raspberry Pi’s shares were priced at 280p in the IPO offer and subsequently jumped 40% to an intraday high of 392p as trading got underway. The initial signs are good but the real measure of whether the deal is a success will come over weeks, months and years, even if a successful first day is always a good start.

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. AJ Bell was among the intermediaries giving retail investors the chance to take part in the IPO.

Companies have historically offered their shares at a slight discount to their intrinsic value to get new investors on board – it’s a little sweetener for taking the risk of backing the IPO. That’s the background behind the phrase ‘IPO pop’ where companies often jump by 10% or so on the first day of trading as other investors pile in as soon as they can in the hope of buying below true value.

The share price reaction to Raspberry Pi’s listing implies that investors believe the company is worth a lot more than its IPO value. 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.

We’ve not had any household names to join the London Stock Exchange since 2021 when we saw listings from Dr Martens, Moonpig and Deliveroo. That could change if rumours prove correct that Chinese fashion giant Shein will pick London for its IPO this year. 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.”