THE historic interest rate cut by the European Central Bank on Thursday (Jun 6) might be just the boost the regional market for initial public offerings needs to spur a flurry of deals before the usual summer lull, according to Bank of America.
The ECB reduced its key rate from a record high, making its move before any potential cut by the Federal Reserve, while stopping short of indicating more easing will follow. Still, the reduction is tipped to fuel the bullish outlook for European stocks and with it prospects for the equity capital market, enticing companies to activate listing plans.
“If there’s a lasting sentiment boost and European markets and ECM transactions continue to perform, then this may indeed motivate more candidates to come forward,” Jerome Renard, head of European Capital Markets at BofA in Paris, said in an interview before Thursday’s announcement.
“There’s still an opportunity window of a few weeks before we get to the summer break mid-July.”
The rate cut comes a day before the Paris debut of night-vision technology firm Exosens. In Milan, luxury sneaker brand Golden Goose Group is about to kick off Italy’s largest listing in over a year.
Europe’s Stoxx 600 index has gained almost 10 per cent this year and traded 0.5 per cent higher as ECB president Christine Lagarde held her post-meeting media conference, pulling back from the record high touched earlier in the session.
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Listings have made a tentative comeback in Europe after two years of drought. Companies have raised almost US$13 billion so far this year, more than double the amount in the same period in 2023. And there are more of what Renard termed “IPO-ready” companies waiting for the right moment to launch their deals.
Strong equity markets and enough examples of other successful stock debuts will be important in encouraging companies to take the plunge, he said.
Europe’s IPO market is yet to reopen fully, given the lingering caution among investors, but the profile of firms seeking listings is starting to broaden beyond top-tier companies, he added.
Those looking for debuts that inspire confidence can cite French tech company Planisware, up about 56 per cent in Paris, or skin-care company Galderma Group, up 36 per cent in Zurich. CVC Capital Partners has climbed about 25 per cent in Amsterdam.
It’s been far from plain sailing all round, though: German perfume retailer Douglas has dropped 23 per cent from its March IPO price and trading volumes in Frankfurt have dwindled.
One concern around mid-size companies considering IPOs is their ability to sustain trading volumes in their shares once the initial buzz around their market debuts fades, according to Renard. Those firms with good visibility around future earnings are at least partially able to overcome this, he said. BLOOMBERG