There’s two ways of looking at Spirent Communication’s (SPT) agreed £1.01 billion takeover by US peer Viavi Solutions, a deal that saw Spirent shares rocket 60% to 173p. On the one hand, you could say it is further evidence of the relative cheapness of technology stocks, and equities in general, in the UK versus other markets.

For example, data from website MacroMicro shows the trailing price to earnings multiple of US shares sat at nearly 25 at the start of March 2024, Japan was on 17, and German equities 15. The UK shares PE was barely more than 10. UK-focused fund managers have been talking up the ‘value’ angle of UK equities for years, yet they continue to largely languish.

LONDON LOSING INVESTOR CONFIDENCE

Which leads us on to the alternative view, that Spirent’s eagerness to agree to the 175p per share offer is a symptom of UK executives’ threadbare confidence that things will improve on UK stock markets anytime soon. Bear in mind that today’s agreed offer is more than 40% below the 300p mark at which the stock traded just a couple of years ago.

Spirent, a proven world-class, made-in-Britain technology company, provides critical testing kit that helps modern fixed-line and mobile communications, like 5G and 6th generation networks. It is part of a crucial communications supply chain that will allow the vast data sets to speed along at latency-light lightning pace and enable technologies of tomorrow, like self-driving cars, robotic medical procedures, and countless other consumer, industrial and security/military applications.

CHALLENGE FOR THE CHANCELLOR

UK assets are being cherry-picked by overseas buyers hand over fist, and as the London Stock Exchange continues to struggle to attract a reasonable share of (albeit meagre) new, high-growth IPOs, UK markets are becoming sapped of growth.

The move just adds to the sense that the shallow waters of the London market are not enough for technology firms to thrive.

‘There is a lot for the Chancellor to consider ahead of tomorrow’s Budget if he is serious about support for the London market and the City in general’, said Neil Wilson of Markets.com. ‘Scrapping the 0.5% stamp duty reserve tax would be a start, but a pro-growth, pro-investment regime change is really what’s required.’

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