European IPO activity plummeted in the third quarter as large listings dried up amid increased market volatility and election jitters.
After surging in the first two quarters of 2024, the aggregate amount offered in European IPOs fell to $770 million in the third quarter — the lowest level since the start of 2020. The number of listings was equal to that in the first quarter and down from the second quarter.
"In what is typically a quieter quarter, the European market experienced a spike in volatility in early August, compounded by emerging uncertainties such as economic slowdown, intensified geopolitical risks and the upcoming US presidential election," said Martin Steinbach, IPO leader of Europe, Middle East, India and Africa at EY. "These factors prompted some big-ticket companies to delay their IPOs, opting to wait for more stable market conditions."
Jitters around elections in France, the UK and the European Union over the summer may also have stopped some companies from going public in the third quarter "as they awaited a clearer political landscape and a reduction in market volatility," accounting firm PwC said in its third-quarter IPO report. The French election in particular roiled the markets at the end of June and in early July as the ruling party of President Emmanuel Macron lost.
Smaller listings
The main contributors to large IPOs in the first half of this year — countries such as Germany, Switzerland, the Netherlands, Spain and Greece — did not host any big listings in the third quarter, Steinbach said. Instead, consistent activity in markets with smaller listings, like Turkey and Italy, kept the overall number of IPOs in the third quarter close to the levels seen in the previous two quarters, he said.
Turkey's Borsa Istanbul accounted for five of the 10 largest IPOs by aggregate amount offered in the third quarter and Borsa Italiana accounted for one, according to Market Intelligence data. The largest IPO in the quarter was the $164.1 million listing of Russian retailer PJSC VI.ru, the data shows.
The sizes of the top third-quarter listings were a far cry from the $2.93 billion raised by Spanish beauty and fashion group Puig Brands SA and the $2.44 billion generated by UK-based investment group CVC Capital Partners PLC in the second quarter, and the $2.54 billion raised by Swiss skincare company Galderma Group AG in the first quarter.
Europe's share in the total aggregate transaction value of IPOs globally dropped to 3.3% in the third quarter from 28.7% in the second and 34.8% in the first, Market Intelligence data shows.
Positive full-year outlook
Nonetheless, the large listings and strong activity in the first half of 2024 bode well for the European IPO market's full-year outlook, with expectations for a rebound in activity over the last three months of the year as well.
The outlook for the fourth quarter, traditionally the strongest of the year, remains positive thanks to a shift in monetary policies, robust stock markets and strong after-market performance in recent IPOs, EY's Steinbach said.
While geopolitical tensions and macroeconomic uncertainties are on everyone's radar, most main market indexes are near all-time highs and volatility is "at a reasonable level" after the spike in the third quarter, Steinbach said. Companies looking to float are also being encouraged by the expected monetary easing in Europe and the US, with both the European Central Bank and the Fed having already started to cut interest rates, he said.
"This is really a tailwind for many IPO candidates because when interest rates are going down, valuations should go up. And you already see the reaction in capital markets," Steinbach said.
Given the state of pipelines now, IPO activity in Europe should continue to improve over the remainder of 2024 and the first half of 2025.
"Everyone that started preparing an IPO this summer should come to market in the next six to 12 months," Steinbach said.