Lockdown Winners Drive Europe’s IPO Market to Surpass 2019
(Bloomberg) -- The European market for initial public offerings raised more money than in 2019, defying the coronavirus crisis and nail-biting Brexit negotiations this year, led by companies that benefited from pandemic-induced lockdowns.
European exchanges hosted 161 IPOs and counting, worth a combined $28.3 billion, surpassing the $26.7 billion raised over 136 listings in 2019, according to data compiled by Bloomberg. This remains only a fraction of global issuance, blown out of the water by the 893 deals worth $134.3 billion in the Asia Pacific region and the record-busting $174.1 billion raised in 483 U.S. deals.
While Norway saw the most deals, London accounted for more than a third of Europe’s proceeds, with 33 deals worth $11.3 billion, up a fifth from last year’s poor showing. This includes international issuers, like Kazakhstan’s digital retail bank Kaspi.kz JSC and two billion-dollar listings by Chinese companies, though the biggest debut came from online shopping emporium THG Holdings Ltd., a rare sizable domestic float.
Next year may bring more home turf listings, as even the possibility of a rocky exit from the European Union isn’t curtailing excitement. “What we are starting to see in 2021 is that the U.K. proportion of the pipeline is looking stronger than usual,” said Charlie Walker, head of equity and fixed income primary markets at the London Stock Exchange.
This, despite the poor relative performance of U.K. stock markets. The FTSE 100 index is down 13% in 2020, more than double the 5.6% dip in the Stoxx Europe 600, while the more domestically oriented FTSE 250 benchmark has slumped 9.8%. And the British economy is facing its worst recession in centuries.
Read more: Rush of IPOs May Lift London’s Five-Year Brexit Blues: ECM Watch
Still, with the Brexit roller-coaster ride started in 2016 getting close to an end, London’s prospects seem brighter. “For next year, there is the expectation that there won’t be those sorts of markers in the calendar that create volatility,” Walker said.
And some big names are already waiting in the wings. U.K. food-delivery startup Deliveroo is said to be exploring a listing in London next year, after stuck-at-home customers turned to its app to order takeout meals, while cybersecurity company Darktrace Ltd. is said to have hired banks for an IPO in the City.
There is no doubt the U.K. could do with more new stocks to beef up its fast-shrinking market. Even the government has taken note, launching a review of listing rules in November, looking for ways to boost London’s appeal to tech and innovative firms and strengthen its standing as a global financial center.
While London has attracted most of the money, it is not the busiest venue, with Oslo clinching that title this year. Norway’s IPO market thundered out of relative obscurity, snagging a record 34 deals, nearly six times as many as in 2019, the data show. And at least three more are set to add to the tally before the year is up.
The surging activity on Oslo’s growth market, digitization of the IPO process during the pandemic and the prevalence of cornerstone investors, previously more common in Swedish deals, all came together to lead to the boom in listings, said Magnus Kvinge, head of equity capital markets for Norway at ABG Sundal Collier ASA.
Sweden came in third after London, winning 29 IPOs worth $2.6 billion. “Since our markets are primarily driven by growth companies and tech, many have benefited from a high interest in investing in these sectors at this stage” given the acceleration of digitization during the pandemic, said Adam Kostyal, head of European listings at Nasdaq Inc.
Read more: Digital-Heavy Nordic Market May Well Double 2019 IPOs: ECM Watch
Other fringe markets stormed up the regional league table, with Warsaw bagging a top five finish thanks to its largest listing on record: Allegro.eu SA’s October float. Poland’s IPO market has burst to life, with everything from gaming companies, boosted by lockdown-fueled frenzy for digital distraction, to online retailers selling bikes and clothes lining up to list.
France, Germany Flounder
Not every country was able to outshine last year’s performance, however. Italy’s fall from grace is particularly acute. Only last year, it was Europe’s most active venue with 35 IPOs worth $2.9 billion. That has since whittled down to a $745 million market.
Traditional behemoth Germany only scraped together $1.3 billion, less than a third of 2019’s proceeds, while France recorded even bigger losses. After previously bringing in deals worth $3.2 billion, Paris has hosted less than $600 million of new floats this year. Half of that came from a blank-check firm listed by French billionaire Xavier Niel and two other partners last week.
Yet, next year is looking better, with some substantial deals in the works. French cloud-computing provider OVH Groupe SAS is said to be preparing a potential IPO for early 2021, while pharmaceuticals giant Sanofi and utility Engie SA are said to be exploring options for some units, which could result in listings. Meanwhile, private equity backers are said to mull listings for German cybersecurity firm Utimaco GmbH and enterprise software developer SUSE.
“We have a really healthy IPO pipeline, probably stronger than we have seen since the disruption caused by Brexit issues several years ago,” said Rob Leach, European head of equity capital markets at Jefferies.
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