Two UK fintech companies, Starling Bank and Thought Machine, are exploring the possibility of going public in moves that could strengthen London's reputation as an international financial hub.

Starling Bank and Thought Machine in Early Stages of IPO Exploration

Starling Bank is reportedly contemplating the initiation of preparations for an initial public offering (IPO) and has received pitches from multiple investment banks, including Rothschild & Co., in recent weeks, according to sources familiar with the matter.

A senior executive from Exchange Group Plc held discussions with Paul Taylor, the Chief Executive Officer of Thought Machine, at a technology industry event last month to advocate for a share offering in the UK. However, both London-based firms are not expected to go public immediately, according to insiders.

Thought Machine may not pursue an IPO until 2025 or later, as the software company demonstrates its ability to effectively execute complex technology transformation projects with banks. In Starling Bank's case, the appointment of a permanent CEO is deemed necessary before it can be deemed ready for a public listing.

While Thought Machine confirmed that an IPO remains a long-term goal, it is currently in the early exploratory stage and does not have specific timelines to share. Representatives for the London Stock Exchange, Starling Bank, and Rothschild declined to comment on the matter.

London Faces Pressure as More Companies Look to US Markets

This potential move by UK fintech firms to go public aligns with the effort to attract more companies to list in London amid concerns that fewer businesses are choosing London for new listings, and some existing firms are delisting in favor of markets like in New York due to higher valuations, deeper capital markets, and less scrutiny of executive pay.

Furthermore, UK regulators have proposed significant changes to the listing rulebook as part of their efforts to enhance London's appeal as a financial center.

Thought Machine was valued at $2.7 billion in a fundraising round last year, while Starling Bank recently reached a valuation of £2.5 billion ($3 billion). Starling Bank, established in 2014 by Anne Boden, achieved its first annual profit in the year ending March 31, 2022, with profits surging from £32 million to £195 million during the subsequent 12 months.

Starling Bank is widely anticipated to choose the UK as its listing venue, reflecting where the majority of its business operations are based. Thought Machine, founded in 2014, provides software solutions to some of the world's largest banks and counts JPMorgan Chase & Co. and Lloyds Banking Group Plc among its backers. The company could still opt to list in the US given its expanding presence in the country, as per sources familiar with the matter.