Washington: Europe’s market for initial public offerings is slowly stirring back to life but it will be a while before there’s a rush of new deals, according to bankers at Bank of America Corp.
Nearly 40 per cent of the roughly $9.5 billion in IPO proceeds that European exchanges have clocked so far this year was raised in the last month alone, according to data compiled by Bloomberg.
Romanian utility Hidroelectrica raised $1.8 billion in Europe’s largest IPO of 2023 last week, following in the footsteps of Thyssenkrupp’s Nucera hydrogen unit. Both stocks rose on their first day of trading, briefly adding to optimism. Less successful was transaction processor CAB Payments Holdings, which fell on its debut.
“It’s a gradual reopening rather than a flood of deals,” said James Palmer, Bank of America Corp.’s head of equity capital markets in Europe, the Middle East and Africa.
Recent deals have been helped by robust equity indexes and multi-year lows for the CBOE VIX Index, a measure widely seen as Wall Street’s fear gauge. It has for much of this year consistently traded below 20, seen as being conducive for IPOs.
“Indices have performed well, but a lot of the individual moves below the surface are more mixed,” Palmer said. “History will tell you that a lull in IPO markets can last for a two-year period before a recovery emerges; it looks like history is repeating itself again.”
Question of timing
The debate now is whether the reopening will happen in the second half of this year, rather than the first-half of 2024, said Jerome Renard, the bank’s head of equity capital markets for the European Union. “From a standstill a couple of months ago, we have recently seen a slight pick-up in IPO consultations across several European geographies and sectors,” he said.
To be sure, some companies have tried to find a good window and failed.
Italian software company Maggioli and its shareholder Pacri Srl withdrew the firm’s planned Milan IPO last week, saying that adverse market conditions didn’t allow for a “satisfactory valuation.”
Just a day earlier, German energy storage provider Intilion also postponed its planned listing, saying an “appropriate” valuation of the company couldn’t be achieved in the current market environment. And in mid-June, WE Soda pulled a London listing that was set to become the City’s largest so far this year, with CEO Alasdair Warren expressing frustration at the low valuation assigned to the company by investors.
“We sense a lot of pragmatism on timing,” Renard said, speaking of issuers. “The priority is finding the right window, even if it requires some patience.”