Europe’s IPO Bankers Say the Market Is Finally Turning a Corner

(Bloomberg) — The return of substantial initial public offerings to Europe this autumn shows the market is turning a corner, and bankers say excitement is building for bigger deals.

There were three IPOs in Europe that raised more than $500 million in the third quarter, with two more due to start trading next week. In total, nearly $3 billion was raised from IPOs in the region, up more than 60% from last year.

The trickle of sizable first-time offerings — and plans by several behemoths to consider an IPO next year — is enough to inject optimism into ECM bankers that good quality companies will once again return to Europe’s equity capital markets in full force.

“The quality of supply of European IPOs has really stepped up, and you’re seeing some of the best businesses in Europe come to market,” said Martin Thorneycroft, global co-head of equity capital markets at Morgan Stanley. Although “we’re not yet in a fear-of-missing-out” environment, he said.

Still, Europe has suffered a dearth of first-time offerings since a bumper year in 2021. That was exacerbated when tariff-induced uncertainty led to multiple companies pulling or delaying plans for an IPO in the first half of this year. Subdued volatility and sky-high indexes have since cleared a path for firms to go public on the back of their half-year results.

“It feels like momentum is picking up in the IPO market, but of course it will remain linked to performance, as success attracts success when it comes to IPOs,” said Jerome Renard, head of European Union ECM at Bank of America Corp.

Performance of recent IPOs has so far been mixed. Shares in classifieds business SMG Swiss Marketplace Group AG have been trading below its IPO after a profit warning by a peer dragged down the newly listed stock. It stands in contrast with Noba Bank Group AB, whose shares have risen 29% from its IPO in Stockholm last week. Cirsa Enterprises SA has traded on average just 1% higher than its offer price since it listed in July.

“The IPO market has reopened, but long-only investors remain disciplined and are still wary of being pushed into transactions that could be mispriced,” Andreas Bernstorff, head of ECM at BNP Paribas SA, said of the current environment.

Alarm company Verisure Plc is in the midst of what could be Europe’s largest IPO in three years, as it seeks to raise more than €3 billion ahead of a debut in Stockholm on Wednesday. Prosthetics maker Ottobock SE is also set to start trading next week in Frankfurt, and its offering could raise up to €702 million.

Even with the boost from IPOs expected in the rest of the year, funds raised in 2025 are unlikely to hit average levels of the previous decade. The amount raised in the third quarter is still a fraction of the more than $50 billion raised in Asia and North America in the same period.

The nascent recovery in European listings comes amid an outburst of IPO activity in the US, which strategists from Goldman Sachs Group Inc. see as a favorable omen based on past IPO cycles that began in New York and spread abroad. While some European issuers are still tempted by the US market, European venues are back on the table for IPO candidates.

“A lot of my trips over to Europe used to be about a company listing in the US, that has balanced out,” John Kolz, global head of ECM at Barclays Plc told journalists last month. Some recent IPOs “had a choice on whichever market to issue in and chose to stay in Europe.”

Notably, two of the more high-profile firms from Europe and the Middle East that have debuted in New York this year, fintechs Klarna Group Plc and Etoro Group Ltd., are now trading below their IPO price despite their strong debuts.

“Going to the US isn’t a magical solution to some of the challenges we’ve seen in certain IPOs,” said Naveen Mittel, head of ECM syndicate at Citigroup Inc. in Europe, the Middle East and Africa. “We just need more assets to come to market in Europe that deliver good returns.”

To be sure, Europe’s muted IPO volumes in recent years haven’t just been about market conditions. It’s also about the type of companies coming to the table, bankers say.

“The market has always been broadly open, but it has been and will likely continue to be rational where you need to bring quality companies at the right valuation,” Luca Erpici, co-head of EMEA ECM at Jefferies Financial Group Inc. said. “The difference now is that the quality of the IPO supply and scale of companies coming to market is improving.”

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