What Tesla Effect? Investors Reluctant on EV IPOs in Europe
(Bloomberg) -- European firms are struggling to gain a slice of the electric-vehicle frenzy that’s pushed Tesla Inc. above $1 trillion, with investors reluctant to give lofty valuations to new entrants.
Electricite de France SA-backed Pod Point Group Holdings Plc, which operates charging stations that users can locate through a mobile phone app, Forsee Power Solutions, a French manufacturer of battery systems for electric vehicles, and established automaker Volvo Car AB all priced listings at the bottom of their asking ranges in the past two weeks.
Europe is stepping up efforts to phase out combustion-engine cars as part of broader plans to reach net-zero carbon emissions, but investors are becoming more selective. A flood of recent listings and increased market risks are adding to pressure European exchanges have long faced in matching valuations available to IPO hopefuls in the much deeper U.S. market.
“The market’s gravitating toward big winners, and when faced with a choice between a small company with no competitive advantage and bigger firms like Tesla, the verdict is clear,” said Chi Chan, European equities portfolio manager at Federated Hermes. “Investors just don’t want to pay upfront for growth with low visibility.”
Operators in the sector are seeking lofty valuations after an almost 200% rally in Elon Musk-led Tesla’s shares in the past 12 months, on the bet that electric vehicles will eventually replace gas-powered cars.
Rivian Automotive Inc., the electric truckmaker backed by Amazon.com Inc., is seeking to raise as much as $8.4 billion in a U.S. IPO that could give it a market value of as much as $53 billion. The listing would eclipse the June offering by XPeng Inc. which raised more than HK$16 billion ($2 billion) in the largest-ever listing for an EV maker.
The competition is putting more pressure on new stocks in Europe. Pod Point fell more than 6% in its debut Thursday, while Forsee Power ended its first session on Wednesday flat.
Still, some are bucking the trend. Ebusco Holding BV, an electric bus firm, has surged since starting to trade on Euronext Amsterdam two weeks ago and priced its deal at the midpoint of its asking range.
“Ebusco’s pitch is that it has lighter buses, meaning it can go further and has smaller battery needs, the kind of competitive advantage investors are looking for in an industry where purchases are made with the head, not the heart,” said Chan.
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