European companies are pulling their plans to list shares at the quickest rate in seven years, citing weak markets and a poor appetite from investors for new issues, according to data from London-based financial analytics firm Dealogic.
Already this year, 45 IPOs worth more than a mammoth $10.1 bn have been abandoned. That is a rise from just 12 IPOs estimated at $4.6 bn that were withdrawn in the same period last year.
These include Dutch car leasing company LeasePlan, which in October abandoned its $1.2 bn listing plans in Brussels and Amsterdam, citing worsening market conditions, and Springer Nature, the German publisher, which in May cancelled its Frankfurt IPO, referencing weak investor demand.
The European IPO market has not been helped by the weak performance of some high-profile new listings, either. Shares in Aston Martin, the luxury carmaker, fell by more than 5 percent on market debut in October. The same day, Funding Circle, the UK’s biggest peer-to-peer lender, saw its stock collapse on the first day of trading by more than 20 percent below its price target.
Worse still, while the backdrop of volatile global markets has led some companies to pull their listings, the broader IPO market appears to be losing its appeal. There were 203 Europe-listed IPOs with a total value of just over $40 bn in the year to end October, compared with 231 with a value of about $41 bn for the same period last year.
There have been efforts to address the shrinking pool of IPOs. In the US, the SEC recently outlined a policy initiative to allow ordinary investors to invest in private companies. In the UK, the London Stock Exchange (LSE) in 2013 created a high-growth market segment that allowed companies to make just 10 percent of their shares available to the public, compared with the 25 percent requirement for the main market.Â
The LSE is also trying to attract more Asian companies, which have become the biggest users of the public markets to raise financing. Asian companies accounted for more than 40 percent of the volume of equity raised globally in 2017, overtaking both the US and Europe, according to data from the OECD.
Shanghai-London Stock Connect, which went live on Friday, will allow companies listed in Shanghai to sell global depositary receipts in the UK, giving fund managers the opportunity to buy into blue-chip stocks. London-traded companies will be able to issue equivalent securities – Chinese Depositary Receipts – but in Shanghai they will not be able to raise fresh capital.
In turn, the lack of new listings has been a blow to investment banks. So far this year, investment banks have made just $783 mn in fees from 230 European IPOs, compared with the peak of more than $2.4 bn they made during the same 10-month period at the height of the dotcom boom in 2000 from 598 IPOs, notes Dealogic. Banks made $905 mn in fees for the January-October period of last year from 231 listings.
