Chips off the old stock test the waters for shelved IPOs

The past few weeks have been worryingly quiet for Europe’s IPO markets. Companies have been biding their time, waiting for the right moment to move. Investment banks are hoping for a post-Easter revival after testing investor appetite for equities with successful block trades.

Having shelved their floats amid the fractious geopolitical environment, several names are eyeing a possible reopening of the IPO window this quarter. These include ABB’s mobility unit spin-off, Coca Cola Beverages Africa, Eni’s renewable division Plenitude, Spanish storage company Mecalux and Swiss skincare company Galderma, all of which have expressed a desire to launch an offering in Q2.

Bumps in the road

These issuers were raring to go until the invasion of Ukraine shook the market in late February. Volatility temporarily subsided towards the end of March only for it to return in the first week of April and up to the Easter break. What’s more, the Stoxx 600 Europe is still down around 7% for the year.

It’s not a great picture for companies seeking a listing. There has been some encouragement from long-only institutions participating in block trades during this fallow period. But committing to IPOs is a whole other game, especially when investors see others experiencing redemptions.

Go with the flow

European equity issuance is down 75% in value year-to-date, according to Dealogic, with IPOs down 87% as investors take stock of the state of the world. Bank of America’s April fund managers’ survey reported that optimism around global growth among respondents was at an all-time low, although equity allocation was still high, for now.

One issue for companies with designs on the stock market is that buy-side capital is showing signs of waning. According to research from Bank of America and EPFR Global, US$206 billion has gone into global equities year-to-date, with ETFs being the main beneficiary. But long-only funds have suffered US$32.4 billion in outflows, and there have been eight straight weeks of EU equity outflows.

As it stands, investors are sitting on their hands. It will take a period of sustained calm before books can be built again. Given the extended pause, any glimpse of that IPO window cracking open should see strong demand for the right candidates.