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, even though volatility has subsided and money is flowing back into equity markets. The global economy was shook by President Donald Trump's April announcement of tariffs on imports from almost all U.S. partners and his subsequent U turn pause. The markets have recovered, even 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 are still wary about new listings. Seven IPO advisers interviewed said that investors' top concerns are conflict like 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.
German medical technology company Brainlab delayed its IPO by a week this week citing "geopolitical uncertainty". Stada, a pharmaceutical company, delayed its debut by citing volatility in the market, while Autodoc, a German car parts supplier, did the same without providing a reason. Cobalt Holdings - a metals investor backed by Glencore - which planned to launch London's largest IPO in 2025 - failed to attract enough investor interest. 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 investor interest was "very high", the conditions for an IPO were not ideal. One equity capital markets banker said that while more money has flowed to European equities from investors looking to reduce their exposure to U.S. investments this year, the money is being invested in large companies instead of IPOs. The reluctance is partly due to cases such as German perfume retailer Douglas. Its shares dropped more than 12% when it listed. 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, partner at Herbert Smith Freehills Kramer, said that it's difficult to draw firm conclusions when other deals, like Hacksaw, continue to get away. "But I do feel that the IPO period needs a break over the summer to reset."
Advisors are hoping that a variety of larger deals will help open up the market during the second half. This could include the return of Stada and listings of Ottobock's prosthetics manufacturer, Deutsche Boerse research and technology unit ISS Stoxx and 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 evaluating 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)
