Affordable computer developer Raspberry Pi (RPI) made a stunning debut on the London Stock Exchange with its IPO (initial public offering) priced at 280p, the top end of the range, and the shares surging 30% higher to 360p in early dealings, valuing the company at nearly £700 million.

UK tech stories are few and far between in London, so investors will be hoping Raspberry Pi’s success can attract more tech sector peers to the market.

Backed by strategic shareholders Sony (6758:TYO) and Arm (ARM:NASDAQ), Raspberry Pi is already profitable and believes it can sustain its strong growth trajectory in a TAM (total addressable market) worth some $21.2 billion (£16.7 billion).

Founded by chief executive Eben Upton in 2012 to make computing more accessible to young people, Raspberry Pi designs and develops low-cost SBCs (single board computers) and compute modules for industrial customers, enthusiasts and educators around the world.

The Cambridge-headquartered company also entered the semiconductor market in early 2021 with the launch of its first semiconductor product, the RP2040 microcontroller.

Raspberry Pi insists its computers are more efficient to manufacture and consume less energy than legacy desktop and embedded PCs.

Since the company began trading in 2012, it has sold over 60 million SBCs and compute modules, 7.4 million of which were sold in the year to December 2023, when revenues ripened up 41% to $265.8 million.

Pre-tax profit powered 90% higher to $38.2 million last year. However, the company has flagged volatility in customer demand in 2024-to-date, which has led to ‘higher than usual levels of inventory’, although management expects this to normalise over the course of 2024 ‘resulting in stronger results in the second half of the year than in the first half’.

This creates some scope for disappointment if the second-half improvement isn’t forthcoming.

AJ Bell investment analyst Dan Coatsworth says: ‘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.’ 

Disclaimer: Financial services firm AJ Bell owns Shares Magazine. The author (James Crux) and editor (Tom Sieber) own shares in AJ Bell.

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