Analysis: Europe sees two-speed IPO recovery as smaller deals lag

Planisware SA

10/05/2024 07:00

By Pablo Mayo Cerqueiro, Andres Gonzalez and Elisa Anzolin
       LONDON, May 10 (Reuters) - A string of stock listings
this year has infused new life into Europe's anaemic market for
initial public offerings, but for some smaller companies it may
take longer to open up, bankers told Reuters.
    While the listings of CVC  CVC.AS , Galderma  GALD.S  and
Puig  PUIGb.MC  have made money for investors and helped drive a
fourfold increase in IPO volumes so far this year, some have
struggled.
    German on-road payments provider DKV Mobility scrapped plans
for a listing, Reuters reported last week.
    Last month, Portuguese insurer Fidelidade, backed by China's
Fosun International, called off an IPO of its private hospital
arm Luz Saude, citing market "instability".
    "The IPO market is open for certain assets, but we're not
yet at a point where there's a price for everything," said
Andrew Briscoe, head of Bank of America's equity capital markets
syndicate for Europe, the Middle East and Africa.
    "It's going to be more interesting to see what happens
post-Q1 earnings because the pipeline of IPOs is more mid-cap in
nature."
    Having access to the stock market allows companies and their
backers to raise funds that can be plowed into the businesses or
for investments elsewhere.
 
    
    LIQUIDITY RULES
    The liquidity in shares - the ability to buy and sell easily
- remains the main challenge for IPOs, Briscoe said. 
    This is, in most cases, a function of the size of the deal
but also how shares behave once they start trading, he added.
    "The bigger the deal, the easier it is to get done because
you have more liquidity and index relevance," agreed Gareth
McCartney, global co-head of ECM at UBS.
    Smaller companies have to fit into attractive investment
themes such as defence and software to entice investors, he
said.
    Multiple midsize IPOs have been successful.
    Shares in Renk  R3NK.DE  - a supplier of gearboxes for
Germany's Leopard tanks - have doubled since its IPO in
February, while French enterprise software provider Planisware
 PLNW.PA  has risen more than 40%.
    Both had failed to list last year but came back with deals
supported by cornerstone investors.
    Defence company Theon International  THEON.AS  and Athens
International Airport  AIAr.AT  are also trading above their IPO
prices.
    This greater focus on liquidity in IPOs is similar to what
is happening in the stock market, where performance has become
more concentrated around a few larger stocks, said Saadi
Soudavar, co-head of EMEA ECM at Deutsche Bank.
    "But we expect small and mid-cap stocks to start performing
given their relative value proposition over the next 12 months,"
he said.
    
    DEALS IN PLANNING
    The recent revival in IPOs after two years of muted activity
comes on the back of a brighter economic outlook that has led to
higher stock prices.
    It also comes as pressure builds on private equity funds,
which ballooned during the era of low interest rates, to return
cash to their funders.
    The rest of the year is expected to feature more "marquee"
transactions that are likely to do well with investors, said
Alex Watkins, co-head of international ECM at JPMorgan,
describing the overall state of the market as much healthier.
    "But for the broader smaller-cap IPO pipeline, these
companies will need very clear story differentiation to stand
out," he said.
    Among this year's candidates is Italian fashion brand Golden
Goose, which has been considering a Milan IPO as soon as next
month, sources familiar with the matter told Reuters.
    The company and its private equity owner Permira declined to
comment.
    Spanish frozen bakery supplier Europastry is also gearing up
for a potential listing before the summer holidays, a source
familiar with the plans said.
    A spokesperson for Europastry declined to comment.
    Others like German transport group Flix, Spanish fashion
group Tendam and business-to-businesses hotel booking group
Hotelbeds have also been preparing to go public.
    German academic publisher Springer Nature has lined up banks
to launch an IPO as early as this year, Reuters reported last
week.

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European IPO volumes: 2004 YTD-2024 YTD ($ bln)    https://reut.rs/44A9I1X
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 (Reporting by Pablo Mayo Cerqueiro, Andres Gonzalez and Elisa
Anzolin; Editing by Elisa Martinuzzi and Jonathan Oatis)
 ((Pablo.MayoCerqueiro@thomsonreuters.com;))