Dealtalk: Bankers pin bonus hopes on European IPO rebound
LONDON (Reuters) - An autumn surge in stock market listings by European companies is raising bankers' hopes that next year will bring more business and bigger bonuses from share sales than a lackluster 2010.
Even with the lift provided by Europe's recent big-ticket sales - such as this month's $2 billion listing of Danish jeweler Pandora (PNDORA.CO) -- issuance volumes so far in 2010 remain well behind previous years.
That means bankers are looking at smaller fees and bonuses for this year. But some see the pick-up in activity as a sign the market is heading back toward volumes last seen in 2007 before the financial crisis hit.
"My pipeline of deals is stronger than it has been since 2007," said Tim Stocks, a partner specializing in capital markets at lawyer Taylor Wessing.
More companies are gathering the confidence to seek listings as European stock markets rally and volatility eases. The Vix .VIX index of Wall Street equity volatility, the so-called fear index, has more than halved since a peak in May.
Italian utility Enel (ENEI.MI) launched the sale of a third of its renewable energy unit this week, aiming to raise up to 3.4 billion euros ($4.73 billion) in what could be Europe's biggest initial public offering (IPO) for three years.
Other live deals include a spinoff by Norwegian oil firm Statoil (STL.OL) of its filling station network for more than 4.2 billion crowns ($717.3 million) which the company said on Monday was attracting robust demand.
And Russian retailer O'Key said on Tuesday it is aiming to raise up to $491 million in a London IPO.
Thomson Reuters data shows equity capital markets (ECM) volumes for the year to date -- including IPOs, sales of shares in companies already listed and capital raisings from issuing rights to existing shareholders -- in Europe the Middle East and Africa (EMEA) amount to $143.3 billion.
That is well below $218.7 billion over the same period in 2009, when lots of companies needed to replenish capital after the financial crisis.
And in 2007 -- the last year of plenty in capital markets -- companies and their owners raised $346.7 billion at the peak of a stock market boom buoyed by cheap credit.
Stocks are an attractive asset class when investors are concerned about the possibility of inflation following monetary easing, bankers say -- assuming shares rise at a faster rate than consumer prices.
"In an era of quantitative easing you either move up the risk curve to pursue growth, or seek out the income from a high dividend yield," said Craig Coben head of European equity capital markets at Bank of America Merrill Lynch (BAC.N)
One banker even warned investors may find themselves chasing a diminishing supply of new share issues as a recovering financial system gives companies and their owners more options for raising capital or selling out.
"The public market needs to stay competitive, otherwise it might see some really good companies disappear off to another sponsor owner," said Henrik Gobel, co-head of European equity capital markets at Morgan Stanley.(MS.N)
But the market remains fickle, as demonstrated by Russian electronic materials maker Monocrystal's decision to shelve IPO plans on October 14.
Investors warn they intend to keep haggling hard on price when deciding whether to buy into new share sales.
Valuation can also depend on novelty value -- if a company floats in a sector already crowded with competitors, the shares may have to come cheap.
"In these cases, valuation is going to be key and bankers are going to have to accept pricing at reasonable discounts," said Mark Hargraves, European portfolio manager at fund firm AXA Framlington.
(Editing by Erica Billingham)
($1=5.855 Norwegian Crown)