Even as money flows in, tariffs and geopolitics are dragging down European IPOs
Advisors say that the Middle East and tariffs are scaring investors and European companies who are considering their initial public offering, even though volatility has subsided and money is flowing back into equity markets.
The global economy was shocked by President Donald Trump’s April announcement of tariffs on imports from almost all U.S. partners and his subsequent U.S.-style pause.
Since then, markets have recovered, including in Europe. VIX, Wall Street’s “fear gauge”, has dropped around 67% since the peak reached following Trump’s tariff announcement. Fund inflows to European stocks hit their second highest level of the century early this year.
Investors remain cautious about new listings.
Seven IPO advisors interviewed said that their top concerns were the impact of conflicts such as the Israel-Iran War and the uncertainty surrounding newly listed companies aftermarket performance.
Scott McCubbin is the head of EY’s UK and Ireland IPO Practice. He said that there was still a little nervousness and a hangover of issues surrounding tariffs and wars in the Middle East.
The advisers noted that some companies are not willing to accept valuations lower than what they had expected.
SHELVED LISTINGS
Brainlab, a German medical technology company, postponed the IPO of its shares this week citing "geopolitical uncertainty".
Stada, a pharmaceutical company, delayed its debut by a month in March citing the volatility of the market. Autodoc, a German car parts supplier, did the same thing last month, without providing a reason.
Cobalt Holdings - a metals investment company backed by Glencore - which planned to launch London's largest IPO in 2025 - failed to attract enough investor interest. A person familiar with this matter said previously. Cobalt Holdings refused to comment.
One person involved in the Brainlab IPO said that the recent spate of shelved listing is making it harder for firms to reopen IPO markets.
The person and another source claimed that investors were unable to agree on a price with Brainlab for the offering. One of the sources said that existing shareholders were unhappy with the composition of the order list. Both spoke under condition of anonymity as the process was confidential.
Brainlab's spokesperson said that while the interest of investors in an IPO was "very high", conditions for such a launch were not ideal.
One equity capital markets banker said that while more money has flowed this year into European equities from investors looking to reduce their exposure in U.S. assets. This money is being invested into large companies' stocks rather than IPOs.
Reticence is a result of cases such as the German perfume retailer Douglas. Its shares dropped more than 12% in its debut on the stock exchange. It then cut its guidance for this year.
According to Dealogic, the number of companies going public in EMEA in the first half of this year has dropped from 59 to 44 compared to the same period in last year.
The amount raised fell dramatically, from $14.1 billion to $5.5 billion.
Naveen Mittel of Citi's equity capital markets syndicate in EMEA said that companies planning to IPO are faced with a very challenging environment.
He said, "You must be clear in your setup, structure and evaluation of the price. There should be no doubts."
A REBOUND POST-SUMMER IIPO?
This year has seen some successes.
Hacksaw, the developer and distributor for online betting games was successfully listed in Nasdaq Stockholm on June.
Michael Jacobs said that it's difficult to draw firm conclusions when other deals, like Hacksaw, continue to be successful. "But I do feel that the IPO period needs a break over the summer to reset."
The market is expected to open up in the second half of the year, according to the advisers.
This could include the return of Stada and possible listings for prosthetics manufacturer Ottobock and Deutsche Boerse’s research and technology division ISS Stoxx as well as classifieds company Swiss Marketplace Group.
Stada said it is evaluating the options for further ownership, including a potential IPO. Swiss Marketplace Group has taken the first steps towards achieving a high level of IPO-readiness, but shareholders have not yet decided on a possible timeframe for a float. Ottobock has said that it is constantly reviewing its options, including an IPO. However, no decision has yet been made.
Deutsche Boerse announced that it was considering an IPO for ISS Stoxx but also could buy General Atlantic, the private equity investor from General Atlantic. It added that no decision has yet been taken.
One equity capital markets banker stated that despite the year-to date bleak numbers, the overall picture of European IPOs looks positive - with positive funds flowing in and a calmening of the market volatility.
The banker stated that "the candidates in the pipeline have little or no tariff impact. We are therefore optimistic that the IPO gates will be open after the summer." (Reporting and editing by Anousha Saoui, Joe Bavier and Anousha Sakoui; Additional reporting and editing by Lucy Raitano and Charlie Conchie)
(source: Reuters)
