Should I buy Raspberry Pi shares after the IPO?

As well as Shein, we could be seeing a Raspberry Pi IPO in London pretty soon. What do we know about this strangely named tech firm?

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There has been a lot of chatter in recent days about a Raspberry Pi IPO (initial public offering) on the London Stock Exchange.

An IPO is where a private firm sells shares to the public for the first time to raise capital to grow the business. It would allow a humble private investor like me to get a small slice of the pie, as it were.

Might I be interested in buying some shares after the IPO? Let’s discuss.

Fruit-sized devices

The Cambridge-based firm makes beginner-friendly coding computers the size of credit cards. According to a Sunday Times report, it could list before the end of May at a value of around £500m.

It gets its playful name from two references. First, raspberry is a nod to a tradition of naming tech companies after fruit. Think Apple, BlackBerry, or Acorn, which is the fruit of the oak tree.

The “Pi” bit refers to the Python programming language it was designed to support. The founders wanted an affordable device that could run Python right out of the box.

Raspberry Pi is actually the trading arm of the Raspberry Pi Foundation. This charity aims to “enable young people to realise their full potential through the power of computing and digital technologies”.

Increasing use cases

The company’s microcomputers are affordable and customisable, making them a favourite among hobbyists and educators for various Internet of Things (IoT) applications.

They can be used to learn to code, control smart home devices like lights and thermostats, and for playing classic games from old consoles (retro gaming). There are tonnes of accessories.

I’ve seen some pretty cool programming uses, such as an automatic system to water indoor plants based on moisture levels. That’d be quite handy while on holiday.

However, from an investing standpoint, I’m more interested in Raspberry Pi reportedly growing outside of niche hobbies and education.

For example, the small size of the devices make them attractive for industrial tasks like monitoring and controlling factory equipment, as well as running simple robots or automating repetitive tasks.

I’d like to learn more about this industrial side of the business.

Fruitful partnerships

Another thing I like here is that the firm has smart backing.

In November 2023, ARM Holdings acquired a strategic minority stake, extending their long-term partnership. Every Raspberry Pi has a CPU (computer processor) based on an ARM design.

Sony is also an investor and manufacturing partner.

According to accounts filed at Companies House for 2022, the firm reported revenue of $188m, a 34% jump over the previous year. It made an operating profit of $20.2m, an 8% increase, which is good to see.

However, it did suffer that year due to a shortage of semiconductors, particularly those made by Broadcom (which it signed a four-year supply contract with).

Another chip shortage at some point would be a risk to growth here, as could increasing competition.

There’s no rush

Before investing, I’d first want to review the company’s growth outlook in the IPO prospectus. Then I’d want to see the valuation of the stock.

London has been starved of tech IPOs since 2021. So if this one happens, there could be a speculative frenzy. I’d prefer to wait till the waters settle before taking a proper look.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Ben McPoland has no position in any of the shares mentioned. The Motley Fool UK has recommended Apple. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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