Home Most Popular The Anatomy of Europe’s IPO Market: A Path of Bumps and Recoveries

The Anatomy of Europe’s IPO Market: A Path of Bumps and Recoveries

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By Pablo Mayo Cerqueiro and Emma-Victoria Farr

LONDON/FRANKFURT, March 22 (Reuters)Emotions ran high in the European IPO market as Swiss skincare company Galderma GALD.Sshone brightly on Friday, serving as a stabilizing force after a bumpy start from German retailer Douglas DOU1.DE, according to industry experts.

Galderma’s grand entrance on the Zurich exchange marked a milestone – Europe’s largest IPO since Porsche P911_p.DE in September 2022.

This long-awaited listing unfolded against a backdrop of numerous European companies lining up to make their public debut.

Anxiety spiked post an over 12% plunge in shares of CVC-owned Douglas, casting a momentarily ominous shadow over IPO prospects.

Nevertheless, Galderma’s shares surged above their set price in initial trading, while across the Atlantic, social media platform Reddit RDDT.N witnessed a staggering 48% leap in its stock value.

Antoine de Guillenchmidt, co-head of equity capital markets at Goldman Sachs for Europe, the Middle East and Africa – a key player in the Galderma and Douglas IPOs – noted, “Sentiments towards IPOs remain robust globally and in Europe, with anticipated smooth sailing for deals in Q2 and H2.”

The performance of these two privately-owned equity firms remained under intense scrutiny from bankers and investors amidst a decline in global IPO issuances for two consecutive years.

The Uncharted Waters of Unsold Assets

Private equity giants find themselves grappling with an eye-popping $3.2 trillion in unsold assets, impeding the flow of capital back to investors and putting a chokehold on fundraising, as per Bain & Co. analysts.

However, with central banks hinting at pausing interest rate hikes, the stock markets have emerged as a promising exit route.

Markus Meier, ECM head in Germany at Bank of America, observed, “The emergence of substantial private equity-backed transactions signals the IPO markets’ receptiveness.”

Europe has already touted success stories this year, exemplified by tank gear manufacturer RenkR3NK.DE. The first newcomer to the Frankfurt Stock Exchange in 2023, Renk has witnessed nearly a twofold increase from its debut price of 15 euros in February. Its IPO had been among several postponed in the previous fall due to interest rate and geopolitical uncertainties.

Following Renk’s triumphant debut, both Douglas and Galderma hurried their IPOs to capitalize on the prevailing optimism.

CVC-owned Douglas raked in 850 million euros ($920 million) to squash its debt, with its shares being priced at 26 euros (the lower end of the price range), eventually dipping to 22.7 euros.

EQT-backed Galderma reaped around 2 billion Swiss francs ($2.23 billion), with its shares commencing trading at 61 francs on the SIX Swiss Exchange, marking a 15% hike from the IPO’s 53 franc per share price – the pinnacle of the price range.

Threads of Caution

Yet, Douglas’ underperformance has left a bitter aftertaste for investors facing losses, potentially acting as a deterrent for upcoming IPO candidates.

Martin Thorneycroft, head of cash ECM in EMEA at Morgan Stanley – a co-leader in the Galderma IPO – reflected, “As we tread the path to recovery, we navigate a selective environment rather than an uninhibited expanse.”

Despite lingering caution, the horizon beckons more novelties, suggested Julian Schulze De la Cruz, a capital markets attorney at Noerr.

Private equity heavyweight Permira gears up for an Italian luxury brand Golden Goose IPO in the upcoming quarter, with Apollo-backed lender OLB Bank also on the brink of going public.

DKV Mobility, a fuel card provider hailing from CVC’s portfolio like Douglas, stands poised to revisit its postponed IPO aspirations from the previous year.

CVC themselves are poised to enter the market with an IPO exceeding 1 billion euros soon after Easter, as per insider sources.

($1 = 0.8987 Swiss francs)

($1 = 0.9241 euros)

For IPO deal valuations: https://reut.rs/4a097sn

(Reporting by Pablo Mayo Cerqueiro in London and Emma-Victoria Farr in Frankfurt; writing by Anousha Sakoui; editing by Jason Neely)

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