Volkswagen’s Awkward Excuse for Slamming on the Brakes

(Bloomberg Opinion) -- Come on, the European IPO market isn’t that bad. Volkswagen AG’s decision on Wednesday to postpone the initial public offering of its trucks business admittedly comes after a terrible January and February in equity capital markets globally. But activity had been slowly picking up, and while things still feel fragile, the problem may be as much to do with autos, trucks and global trade as it is market sentiment.

A December market correction, the U.S. shutdown and Brexit chaos took international equity issuance in the first two months of the year to below financial crisis levels. This month has been more active. In the U.S., Levi Strauss & Co. and Lyft Inc.’s IPOs are on the move. Sunrise Communications Group AG is trying to raise the equivalent of its market value in stock for an acquisition, while Marks & Spencer Group Plc is raising equity for a joint venture with Ocado Group Plc. Equity volatility has settled at the level that should be conducive to these kinds of deals.

Volkswagen’s Awkward Excuse for Slamming on the Brakes

That suggests VW could probably have got its IPO away if it really wanted to, but not at a great price. Its investors were keen on the company just getting on with it, without fighting for the last penny of value, according to research by analysts at Evercore. But the compromise on value, at a time when the auto industry is suffering from increasing trade tensions and rising raw material costs, was evidently too much for management to take.

It’s too soon to interpret this as the nail in the coffin for the European IPO market in the first half of this year. A few big announcements in the coming weeks would point to this being an industry problem, not a market problem.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.

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