January 21, 2013 / 4:00 PM / 5 years ago

European IPO hopefuls tap narrow window

* Companies eye window ahead of early Easter, market wobbles

* Convalescing new listings market continues recovery

* Investors move money into stocks, but cautious on IPOs

By Kylie MacLellan

LONDON, Jan 21 (Reuters) - European companies looking to make their stock market debut have a couple of months to act before an uncertain economic outlook risks sidelining a recovery in new issues and an early Easter interrupts their sales pitch.

Ebullient stock markets have so far this month encouraged around half a dozen firms in Europe to launch plans to float, seeking to raise more than $3 billion in the first few months of the year.

But there are reasons on both sides of the Atlantic why those seeking to seize the moment will want to act fast, and certainly before stock markets close for Easter and many investors head off on holidays.

Parliamentary polls in Italy next month could put Prime Minister Mario Monti’s reform programme in doubt and put paid to the current calm in Europe’s debt woes, and the U.S. body politic, still nowhere near a lasting budget deal to balance taxes and spending, is preparing to do battle again.

“The U.S. fiscal cliff revisit in February or March could cause some wobbles, and the Italian elections in mid-February could also cool things down, so if you wanted to get a sale away, then you would be looking to act now before the conditions change,” said Neil Wilkinson, European equities fund manager at Royal London Asset Management.

Europe’s IPO market, which has been struggling during the region’s long debt crisis and sluggish economic growth, started to show signs of life in the final months of 2012 as confidence picked up.

On Monday, Russian trading venue the Moscow Exchange and British housebuilder Crest Nicholson announced plans to float, while German residential property group LEG was due to begin roadshows for its planned 1.4 billion euro ($1.9 billion) listing.

“There is a finite window now for things to happen,” said one banker working in equity capital markets (ECM), the part of an investment bank that runs share sales including initial public offerings (IPOs).

Most companies choose to launch listings after publishing their full-year results, but some advisors said getting those audited ready in time to complete the month-long IPO process before the traditional Easter slowdown will prove a challenge.

This year Easter day falls on March 31 - only once in the last 100 years has it been earlier - and much of Europe will clock off for a long weekend.

“Numbers-wise, it is hard to come ahead of an early Easter,” said a second ECM banker. “It is a bit too ambitious for most companies ... from an accountancy perspective.”


Around $3.7 billion was raised from IPOs in Europe, the Middle East and Africa in the first quarter of last year, and $17.4 billion over the whole of 2012, compared with more than $100 billion in 2006 before the financial crisis hit.

Despite the paucity of deals and a poor recent precedent in last year’s Facebook IPO in the U.S., investors on the whole did well out of European IPOs in 2012, with six of the biggest now more than 20 percent above their float price.

While the recovery remains fragile, a lack of IPO activity through much of last year has left a backlog of deals that could come to market in 2013, bankers said.

There are signs these deals will be welcomed by investors.

Latest fund sales data from Skandia, part of the Old Mutual Wealth investment platform, suggest money is slowly moving away from so-called safe havens of cash and property towards equity investments.

Sales of cash funds on its platform fell 25 percent in the last three months of 2012 compared with the previous quarter, while sales of European equity funds jumped by 20 percent.

Royal London’s Wilkinson said that with so many ‘tried and tested’ companies looking such good value, bankers would have to work hard to convince money managers to invest in new stocks.

“It’s a buyer’s market ... There are some managers who just won’t participate in IPOs. I am not one of them, but you do have to analyse each one on its own, and it takes a lot of work before deciding to get involved,” he said.

“It’s not that the books are dressed up, but we are aware the business is being made to look as attractive as possible.”

Despite a contraction in the German economy in the final quarter of 2012, there is talk of more German residential IPOs, including Deutsche Annington, in a market where property yields are about 4.5 percent for the best housing and 6 percent in secondary locations.

“Yields are not especially high, but it’s all about stability,” said Joseph Schaesberg at property consultant CBRE . “If you’re looking for stability, come to Germany. If you want higher returns, go further east.”

Polish real estate holding firm PHN and Russian private freight rail operator NefteTransService are also among those who have unveiled plans to list.

Some investors and bankers said the idea of an Easter deadline was overblown, given that not all countries celebrated the Christian festival, and the pre-marketing stage of the IPO process could still run over a long weekend.

“I can see a lot of deals running over Easter,” said one ECM banker. “If the market is there you have got to take it.”

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