By Charlie Conchie
The boss of Oaknorth has said London’s public markets are looking “less attractive” than their international peers, signaling the bank’s thinking as it plans a potential IPO.
Speaking with City A.M., Rishi Khosla, co-founder of the digital business bank, said “absolutely no decision” had yet been taken on when and where to float the company but years of “insular” Brexit debate had sullied the appeal of the UK on the international stage.
“The UK has not done the best in branding over the last two, three, four years. Actually, really since the Brexit referendum vote,” Khosla, told City A.M., in an interview recorded prior to the announcement of a general election.
“Since then, we have become quite insular on the Brexit discussion, and then obviously post-COVID. We just haven’t come out and created the reputation for the UK as the place where things are happening.”
Khosla insisted no decision had been taken on when and where to list and said the public markets were “not attractive right now”. However, he added that the UK was “less attractive on a relative basis” than other markets.
The comments from one of the country’s top IPO prospects will likely unsettle some in the City as the government and London Stock Exchange bosses look to woo more growth companies onto the market.
As one of a crop of fintech ‘unicorns’ to spring up in the mid-2010s, Oaknorth has been among the top targets of a government-led charm offensive to get companies to list in London.
The City has been plunged into the doldrums by a dearth of new IPOs and a lack of high-growth tech companies listing on the London Stock Exchange. Private buyers have also launched a wave of bids for London-listed companies, which are seen as cheap compared to their international peers.
“The key challenge is that you don’t have a significant number of growth companies on the London Stock Exchange and because of that, you don’t have a significant number of growth investors who invest in the London market,” Khosla added.
“Without the growth investors, you don’t have enough depth of potential purchasers. And therefore as a company, you let yourself be held hostage by a very small group of investors.”
Khosla and Oaknorth have reportedly beenleaning towards the US as the potential IPO destination in recent months and the firm is poised to accelerate its growth push into the country in the coming months.
The Soho-based digital bank, co-founded by Khosla in 2015, has posted a jump in annual profit on the back of higher lending and an expansion into the US.
In its most recent set of results, the firm reported a 23 per cent increase in pretax profit to £187.3m in 2023 from £152.3m in 2022.
The bank said that it had applied for a US representative office and was “actively exploring M&A opportunities” within the banking and fintech sectors there, as well as providing its software to US banks.
Oaknorth appointed former City watchdog boss Lord Adair Turner as its chairman in January in a move seen as an attempt to bolster its senior expertise ahead of a potential listing.
The SoftBank-backed lender, most recently valued at $2.8bn in 2019, has said it was considering listing across multiple exchanges to access a wider range of investors.
