European IPO market feels like global leftovers

Leftovers of a fast food meal are seen on a snow covered table of a closed restaurant after the Austrian government announced to extend the lockdown as the coronavirus disease (COVID-19) outbreak continues in Vienna, Austria, January 17, 2021.

LONDON, July 12 (Reuters Breakingviews) - Europe is increasingly looking like an also-ran in the global competition for initial public offerings. A string of companies recently cancelled their European debuts. Trendier groups like Soho House, Turkish e-commerce firm Hepsiburada (HEPS.O) and Italian vaccine vial maker Stevanato (STVN.N) have meanwhile opted to migrate across the pond. A vicious cycle is forming. (AMZN.O) French parcel delivery company Colis Privé postponed its IPO on Monday, blaming market conditions. Livestock health company Huvepharma canned its 4 billion euro offering in June, saying it’s best off in the barn for now. Chemicals company BASF (BASFn.DE) put a listing of its energy business on hold too, saying the market is underestimating gas and oil assets. French car-parts distributor Parts Holding Europe (known as Autodis) and $2 billion logistics operator Primafrio also pulled their deals.

True, a few enterprises in hipper businesses, like Spanish renewables firm Acciona Energia (ANE.MC) and Believe (BLV.PA), a $1 billion French digital music company, got their listings away, but had to price at the bottom of their projected price ranges. Overall, European companies had a decent first quarter, selling $25 billion of stock, but the momentum slipped to just $19 billion in the last quarter, according to Refinitiv.

Hotter debuts are simply leapfrogging to New York, such as $4 billion Hepsiburada and $7 billion Stevanato. Despite the threat of a currency crisis at home, Hepsiburada jumped 12% in its debut. Membership Collective Group, parent of Soho House, which posh Brit Nick Jones founded in London, is headed to the Big Apple, too.

Years of middling aftermarket performance may explain investor ambivalence. The Renaissance IPO Index measuring rolling two-year post-listing performance shows around a 230% increase for American IPOs compared to just 125% for Europe, Middle East and Africa listings over the last five years. Better post-IPO trading, possibly boosted by hot technology stocks, has deepened the pool of investor capital in the United States relative to Europe, which also suffers from a relatively flabby economic outlook.

The danger for European capital markets is that this trend becomes self-fulfilling, especially for high growth e-commerce, tech or biopharma firms. The short-term remedy is for European companies to lowball their valuations to persuade more sceptical investors to hop on board. But the prospect of leaving money on the table will, longer-term, send those who can hurtling across the Atlantic.

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- French parcel delivery company Colis Privé said on July 12 it was postponing for a few months its initial public offering initially envisioned for early July, citing unfavourable market conditions.

- Italy’s Stevanato Group is seeking a valuation greater than $7 billion in its U.S. initial public offering, the maker of glass vials for Covid-19 vaccines and other healthcare products said on July 7.

- Livestock health company Huvepharma pulled its IPO on June 30. Chief Executive Kiril Domuschiev said that feedback to investors made it clear that the company’s growth trajectory would “be best supported by staying private for the time being”.

- IPO proceeds globally rose 131% in the second quarter to $79 billion from the previous year, data from Refinitiv up to June 18 showed.

Editing by Rob Cox, Oliver Taslic and Karen Kwok

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Dasha is a columnist in London writing about the consumer goods sector, as well as Russia and Turkey. She has been at Reuters since 2012 as deals reporter in London and Turkey correspondent, covering the 2016 coup and the war in Syria. Prior to that she produced business news on BBC radio and worked as an investment banking analyst. She holds a degree in Politics, Philosophy and Economics from the University of Oxford.