War and market jitters threaten Europe’s IPO launch season

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A trader sits in front of a television broadcast showing German Health Minister Jens Spahn during a trading session at the Frankfurt Stock Exchange amid the coronavirus disease (COVID-19) outbreak, in Frankfurt, Germany Germany, December 30, 2020. REUTERS / Ralph Orlowski

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Feb 22 (Reuters) – March was expected to be a busy window for European stock quotes, but a potential conflict between Russia and Ukraine and market uncertainty are prompting companies to put their IPO plans on hold on the ice.

Proceeds raised so far this year by companies going public in Europe, the Middle East and Africa are down 79% to $3.1 billion from the same period last year, when the companies raised $15.1 billion in a record year for the equity capital markets. activity in the region, according to data from Refinitiv.

Soaring stock markets have boosted the IPO market in recent years. But with post-pandemic measures likely to drive up inflation, an increasingly tight economic environment is dampening investors’ risk appetite for new names.

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Expectations had previously pointed to a busy March window for initial public offerings (IPOs) this year after several deals were postponed from late 2021.

March typically marks the start of IPO season, as most companies wait until their fiscal year-end to flesh out their IPO prospectus with their most recent results.

But the pipeline ahead is under pressure as hopes for a diplomatic end to the Ukraine standoff fade and inflation fears weigh on markets.

“I suspect a significant disruption and delay to the pipeline because of what has happened. Many companies are sitting around, watching this situation and waiting to list,” said Kasper Elmgreen, head of equities for the French firm. Amundi asset management.

A number of European companies, including Spanish bank Ibercaja, have launched major IPOs after officially starting the process.

On January 27, the Dutch file transfer service WeTransfer scrapped an Amsterdam float that would have valued it between 629 and 716 million euros.

German dental prosthesis maker Ottobock is waiting until September to launch its multibillion-euro stock market listing, adding to a string of deals delayed in recent weeks.

Fears that Moscow could launch a full-scale invasion of Ukraine have taken their toll.

“Any headline-driven market is tough, and the impact is negative in terms of adding risk,” said Andrew Briscoe, head of ECM EMEA syndicate at Bank of America.

“Naturally there will be delays and some will have to be a bit more nimble in timing.”

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Larger deals with better access to liquidity and high-quality assets are expected to continue, several bankers said, but some deals are stalled until the situation stabilizes.

“Whether you’re large cap or small cap, this will definitely cause most issuers to pause and try to take stock, especially when you’re looking at an IPO and a four week process, and things change day- today,” said a second banker who handles IPOs in Europe.

Along with a volatile market, the poor performance of some of last year’s IPOs is further increasing investor pessimism, with companies like Deliveroo (ROO.L) to Alphawave (AWE.L) trading well below their registration price.

The FTSE Renaissance IPO index for Europe, the Middle East and Africa is down around 23.5% year-to-date.

Norwegian oil and gas firm Var Energi completed a NKr 77 billion IPO last week, but shares closed Monday 2.3% below the IPO price.

“If an investor is already very worried about the state of their current portfolio, that usually doesn’t trigger the mindset needed to invest in an IPO,” a senior European capital markets banker told Reuters. .

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Reporting by Lucy Raitano, editing by Pamela Barbaglia and Howard Goller

Our standards: The Thomson Reuters Trust Principles.

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