Oxford Biotech is off to a rip-roaring start to life as a public company after the UK-based gene-sequencing company saw its share price soar by over 41% yesterday on their first day on the London Stock Exchange. The IPO valued the company at £3.4 billion with shares sold at 425p but they leapt as soon as trading opened yesterday to close the day up 187.5p at 612.5p-a-share.

There has been some criticism the dramatic increase in the biotech’s valuation meant the major banks who worked on the float, including Numis, Barclays, JP Morgan, Bank of America and Citygroup, demonstrably got the IPO pricing wrong. However, there is also a strong argument the pricing intentionally left room for early share price growth.

The Times newspaper quotes a City trader who commented:

“They’ve priced it to make sure that it’s a success. Nanopore is a loss-making company and the chances are it’s going to have to raise money [in the future].”

There have been several London tech IPOs this year at high valuation multiples, most notably food delivery app Deliveroo which lost a quarter of its value on day one and chip maker Alphawave which slumped 10%, that have seen their share prices drop in the days and weeks after they have started trading. The banks running the Oxford Nanopore IPO will have been keen to avoid a repeat and accordingly priced the float more conservatively.

However, the popularity of the Nanopore IPO was never in much question. Brokers have complained many of their clients missed out on being allocated stock during the IPO and demand could have been better managed, to the company’s benefit, with at least somewhat more aggressive pricing.

Nanopore’s impressive start to life as a publicly listed company means the 1.3% equity stake co-founder Gordon Sanghera holds now has a paper value of £63.5 million. 60-year-old Together with Spike Willcocks and Hagan Bayley, experts in nanopores, Sanghera co-founded Oxford Nanopore in 2005, backed by IP Group, the London-listed investor and incubator that specialises in university spin-outs. Oxford Nanopore was spun out of Oxford University.

IP Group sold some of its stake, £87 million worth, during the IPO but is estimated to have retained a 10.3% equity holding currently worth almost £500 million. Co-founder Willocks, now Nanopore’s chief business development officer, sold £1.6 million of shares through the IPO and has retained equity worth almost £30 million. Sanghera chose not to sell any of his shares.

Headquartered in Oxford Science Park, Oxford Nanopore also has offices in San Francisco, Beijing and Shanghai and has 640 employees. Its gene sequencing technology, which makes the process much cheaper and easier than it has ever been, enables its customers to research areas from human genetics, cancer and viral outbreak surveillance. The company has been key to UK and global efforts to sequence new variations of the Covid-19 virus.

Disgraced fund manager Neil Woodford, whose income fund was controversially wound down a couple of years ago after liquidity issues resulting from too many investments made in illiquid stock of still private companies, was a major investor in Oxford Nanopore. U.S. investor Acacia Research acquired 5.5% of Nanopore from the fund’s administrators for £21 million. It recouped much of that initial investment by selling £16.6 million of stock through the IPO but still holds around 4.4% of the company, which is now worth £210 million.

Woodford’s other fund, Patient Capital, which was taken over by asset managers Schroder and is now called Schroder UK Public Private Trust, earned £11 million from the IPO and retains a 2.9% stake in the company worth about £65 million.