UK digital lender Atom Bank is eyeing up a listing in New York in what will be a major blow to London’s efforts to promote itself as a premier destination for tech IPOs.

Durham-headquartered Atom, founded in 2013 by Mark Mullen, is set to float in New York via a £700m merger with a special purpose acquisition company set up by Donald Trump’s former commerce secretary Wilbur Ross, Sky News first reported.

The terms of the deal would see the digital lender merge with Ross Acquisition Corp II and would raise about £150m through a so-called PIPE – a private investment in public equity.

Plans for the deal are already at an advanced stage, sources told Sky News, but there was no guarantee the deal would go ahead as recessionary fears and soaring inflation batter the public markets.

Atom’s shift onto the public markets has long been the subject of speculation, with boss Mark Mullen saying a £75m cash injection in February was “a fundamental next step on our journey toward IPO”.

The firm claimed in February that no decision had been made over a destination for the floatation, however.

The SPAC was listed in spring of last year by Ross, who has been a prominent financier on Wall Street for decades and helped shape the US government’s ties with China during his time working in the Trump administration between 2017 and 2021.

Any deal will be a major blow to London’s efforts to promote itself as an international listings capital.

Politicians have launched a charm offensive in recent months to try and woo more tech firms and fintechs into floating in London, with City Minister John Glen meeting bosses in February in a bid to sell London as a place to float.

Russ Shaw, chief of Tech London Advocates, said that a US listing for the firm would be “disappointing”.

Shaw added: “Although is it great to see UK fintech Atom Bank potentially prepare to list on the public markets, it is disappointing – if true – to see a home-grown fintech opt for a SPAC (Special Purpose Acquisition Company) listing in the US versus a listing on the London markets,” he said.

“With its customer base and business anchored in the UK, a London listing by Atom Bank would have been another positive milestone in supporting and strengthening the growth of the UK fintech ecosystem.

Shaw called for decision makers to double down on the Hill Review recommendations, laid out last year to boost London’s appeal as a listings capital, and include making the London markets more attractive to SPACs as an option.

Plans for a SPAC merger for Atom come despite a slowdown this year as regulators ramp up scrutiny of the acquisition vehicles in the US, and firms pullback from IPOs amid market volatility.

After a frenzy of floatation in 2021, just 78 SPAC listings were issued in the three-month period ended March 31, with average deal size valued at just half of what it was last year, according to Pitchbook.

Analysts at Pitchbook said companies were pulling back from SPACs amid a wider IPO slowdown.

“In the same way that companies pull IPO plans rather than list during a negative pricing environment, we believe potential SPAC targets may opt to delay or forgo any negotiations until there is a clearer picture of the markets,” analysts at Pitchbook said.

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Atom Bank eyes New York IPO in major snub to London