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EMEA’s equity markets offer mixed messages

Looking back over 2021, the year was nothing short of toast worthy. Total EMEA IPO deal value came in at US$98.8 billion, a level not seen since back in 2007. Add to that the US$160.2 billion in follow-ons and US$21.5 billion in convertibles and this rises to US$280.5 billion—well above 2020's US$197.3 billion in total equity market activity.

But, after halftime, things lost some steam. According to Dealogic, 37 deals expected in 2021 were pulled or postponed, 28 of which bit the dust from June onwards. With so much on the menu, investors' bellies were soon fit to bursting, prompting greater pickiness as the year progressed.

As we go into 2022, what lessons can be learned from 2021's year of two halves?

1/ Decisions, decisions—when it comes to going public, you have options 

In addition to trad IPOs, EMEA welcomed a stream of SPAC IPOs for the first time, accounting for 9% of all listing activity. Unlike the US, which gorged on SPAC floats at the top end of last year, the picture in Europe has been comparatively sedate, which is no bad thing. A healthy and growing, if limited, SPAC market will likely add to this year's total value and give corporates more choice.

Another option for companies seeking a path to the public markets is the direct route. The door to direct listings was opened in EMEA by Wise, the fintech making a landmark US$11 billion float in July, the largest direct float in UK history. Corporates looking at IPOs will need to do their homework to figure out which is their best option.

2/ Pipelines may be full to bursting, but that doesn’t guarantee the best outcome

UBS has indicated that, while the conditions are ripe for healthy activity in 2022, the year may not be able to match 2021. By contrast, others point to a full pipeline and, importantly, the fact that investors are well prepped for forthcoming deals, which is conducive to high engagement.

Add to that the continued pressure for growth by acquisition, a catalyst for follow-ons and rights issues that should bump up total equity activity.

But if the inflation theme picks up pace and leads to a more hawkish turn in monetary policy, then continued selectivity will likely be a feature of 2022, with investors thinking twice before jumping into rate-sensitive tech stocks.