Market Analysis

The European IPO market is not expected to see new candidates until after the summer due to political uncertainties affecting the markets, according to bankers.

This week, Italian luxury sneaker brand Golden Goose and Spanish fashion retailer Tendam both postponed their planned listings, citing the impact of France's snap election on the markets.

The recent election call in France, prompted by a significant loss to the far-right in a European Union vote, caused the euro to drop, French blue-chip stocks to decline, and bonds to tumble.

Despite this, some bankers emphasize that the market is not entirely closed to deals, as share sale volumes have shown signs of recovery this year. For instance, frozen bakery goods company Europastry announced its intention to list in Spain this week, aiming to raise at least 225 million euros.

"I don't think the market is closed, but for an IPO market that was cautiously recovering, it has been a bit of a setback," said Andreas Bernstorff, head of equity capital markets at BNP Paribas.

Even with fewer IPO candidates due to ongoing political uncertainty, and some companies delaying their plans to 2025, share sales in already listed companies are expected to continue. Investors remain interested in block trades, exemplified by the recent sale of approximately $150 million worth of shares in Johannesburg-listed Momentum Metropolitan.

"The recent volatility around the French elections is more likely to impact continental European transactions sensitive to the macroeconomic environment. However, there is also a positive discussion in Europe about pro-growth policies which could boost investor sentiment," said Alex Watkins, co-head of equity capital markets international at JP Morgan.

Share sales across Europe, the Middle East, and Africa have reached $89.8 billion year-to-date, up 45% from the same period last year, according to Dealogic data. However, this is still below the recent high of $168 billion for the same period in 2021.

The value of IPOs year-to-date stands at $19.5 billion, a 117% increase from the same period last year, with successful offerings from companies like CVC, Galderma, and Puig.

Nevertheless, the unexpected announcement of a parliamentary election in France, starting on June 30, caused a spike in volatility and a sell-off in stocks. Last week, the Euro STOXX 50 volatility index reached its highest level since October.

On Tuesday night, Golden Goose, known for its $500 sneakers, and its owner, buyout fund Permira, decided to withdraw an IPO announced at the end of May. The offering, worth at least 508 million euros, faced uncertainty as shares of France's LVMH and luxury peer Moncler dropped.

Part of Permira's decision was due to uncertainty over the after-market performance, particularly given the poor performance of another of its IPOs, Dr. Martens. The British bootmaker's shares have dropped 78% since its 2021 float. Permira declined to comment.

The summer is typically a quieter period for new issues, and bankers have been warning that investors are becoming more selective about the deals they support.

"There is a moderate pipeline post-summer, but it won't be a bonanza," Watkins said. "The pipeline is building strongly for 2025 onwards."

Investors are concerned about the potential impact of the French elections and what a shift to the right politically could mean for the European Union, Ukraine, and fiscal policy, one equity capital markets banker said, speaking anonymously.

The upcoming U.S. elections in the autumn are also likely to affect the timing of IPOs, but bankers believe that investors are less worried about potential market volatility, potentially giving companies looking to list from September onwards a better chance.

"There are some IPOs lining up to come after the summer, and they might have a better shot than previously thought," Bernstorff said.

Companies such as German academic publisher Springer Nature and drugmaker Stada could IPO later this year, according to recent reports from Reuters.

Paraphrasing text from "Reuters" all rights reserved by the original author.