(The author is a Reuters Breakingviews columnist. The opinions
expressed are her own.)
By Pamela Barbaglia
LONDON, July 31 (Reuters Breakingviews) - European
investment bankers have been grasping around in the dark while
trying to price initial public offerings this year. And so far,
the performance of the floats that have got away has been
relatively poor. It’s a major red flag for larger IPO
candidates, like CVC Capital Partners or EQT’s EQTAB.ST
Galderma.
Only 65 companies decided to brave choppy stock markets in
Europe, raising $6.6 billion in overall proceeds, according to
Dealogic data. That’s 87% below 2021’s record volume over the
same period, and is on track to be 69% below the average between
2015 and 2019. One of the bigger IPO contenders, Turkish ash
producer We Soda, pulled its London float last month.
The pricing has been all over the place. Very few of the
IPOs that did get away managed to snatch the healthy first-day
pop and steady after-market trading that underwriters try to
engineer. Of the 10 larger floats analysed by Breakingviews,
half are below their listing level. On average, the shares are
up 3% since IPO. Though not a perfect comparison, it’s notable
that the STOXX Europe 600 Index .STOXX is up nearly 10% in
2023, making the meagre IPO returns more embarrassing.
To get deals over the line, bankers have had to err on the
side of caution. Italian betting group Lottomatica LTMC.MI and
German web-hosting company IONOS IOSn.DE priced at the bottom
of their initial ranges. Even Romanian energy group
Hidroelectrica ROH2O.BX and Thyssenkrupp Nucera NCH2.DE ,
which both tout solid green credentials, required creativity
from the underwriters. The state-owned Romanian group relied
heavily on local pension funds to get the deal away. Nucera,
meanwhile, priced below the mid-point of its initial range,
despite the help of anchor investors like Saudi Arabia’s
sovereign wealth fund.
None of that augurs well for future IPO candidates. Backers
of new equity issues tend to expect a market-beating return to
compensate for the risk of buying untested private companies.
The paltry performance of this year’s floats will give potential
investors pause for thought.
The IPO near-freeze therefore looks set to continue. Bankers
expect many price-sensitive buyout funds to hold off on large
European listings for the remainder of the year. Take EQT, the
Swedish firm which recently opted for a private placement for
its Swiss skincare firm Galderma. That gives it time before it
has to go ahead with a long-planned IPO, which Reuters reported
could value the company in excess of $20 billion. Similarly, CVC
Capital Partners has long been planning a listing. In one sense,
the timing couldn’t be better, as the buyout fund has just
raised a record 26 billion euro fund. But the firm will want to
wait for an obvious IPO thaw before it presses the button. That
looks some distance away.
Follow @pamela_msg on Twitter
CONTEXT NEWS
Romanian energy producer Hidroelectrica floated on July 12
in a deal priced at 104 lei ($23.42) per share, implying a
market capitalisation of $10.3 billion. The initial public
offering ranks as Europe’s largest so far this year.
Dealogic data shows that IPOs in the region raised a total
of $6.6 billion between the start of 2023 and July 20. That was
slightly higher than in the same period last year, but
two-thirds below the average level between 2015 and 2019.
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Europe’s disappointing top 10 IPOs this year https://tmsnrt.rs/43G1of9
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(Editing by Liam Proud and Oliver Taslic)
((For previous columns by the author, Reuters customers can
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