IPO outlook ‘grim’ unless sea change occurs

The outlook for initial public offerings across European markets for the rest of the year is ‘grim unless there is a sea change in market sentiment’, finds a new report from accountancy firm PricewaterhouseCoopers (PwC).

During the third quarter of the year there were 121 IPOs in Europe, raising €9.4 billion (£8 billion), PwC’s Q3 IPO Watch Report finds. The statistics compare favourably with the 85 IPOs completed during the same period of July and September last year, which raised €2.5 billion. However, of the money raised this quarter, €7.4 billion was generated from four IPOs.

The third quarter findings include the €5 billion float in July of the formerly government-owned assets in Spain and Poland, and €2.4 billion IPO of Dia, the Iberian discount supermarket retailer with a strong presence in the emerging markets.

The report finds that in the past few weeks, the market has slumped further due to political and market uncertainties with only €23 million being raised on European exchanges in September. The extent of market turmoil was reflected in the postponement of the Spanish national lottery IPO last week, which the report notes would be seen as a ‘good bet’ in calmer times, but was pulled due to the fragile market.

Among UK small and medium-sized enterprises (SMEs), the situation is causing headaches for businesses and private equity firms wanting to raise money on the pubilc markets or achieve an exit.

One company, online sports retailer Wiggle, whose majority shareholder private equity is Isis Equity Partners, continues to consider its options. There have been reports that the business has abandoned an IPO, but insiders say a float remains on the table, with ISIS meeting potential bookrunners last month.

Richard Weaver, head of capital markets at PwC, comments, ‘Against the most challenging IPO conditions in recent memory, the prospects for 2011 look grim unless there is a sea change in market sentiment. The next month or so is typically a peak period for IPOs as companies tap the markets for funds after the summer.

‘The recent Spanish lottery IPO being pulled is a telling indicator of current conditions in the European market. The next few weeks will be critical for how 2011 will play out.’

The PwC report adds that the trend is mirrored in the US with IPO numbers down 38 per cent from 32 to 20 and money raised down 42 per cent from €3.8 billion to €2.2 billion compared with last year. However, there has been an increase in the number of companies entering the shelf registration process from 67 in the same period last year to 74 now.

IPO Watch Europe surveys all new primary market equity IPOs on Europe’s principal stock markets and market segments, including exchanges in France, Germany, Greece, Holland, Ireland and the UK, on a quarterly basis.

Todd Cardy

Todd Cardy

Todd was Editor of GrowthBusiness.co.uk between 2010 and 2011 as well as being responsible for publishing our digital and printed magazines focusing on private equity and venture capital.

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