Europe’s IPO Wave Puts Discount Math at Top of Buyer Checklists

(Bloomberg) — The roughly $7 billion batch of European initial public offerings this fall has shown sellers must balance the risk of upfront cash versus leaving enough room for the stocks to trade higher.

The biggest IPOs — Noba Bank Group AB, Ottobock SE & Co., SMG Swiss Marketplace Group AG and Verisure Plc — had mixed performances in trading since their debuts. Appetite has continued in the open market for Noba and Verisure, which are trading 28% and 22% above their respective IPO prices. SMG’s shares are underwater after rising in its trading debut, while Ottobock has pared early gains to hover around its offering price.

The deals suggest investor appetite for new stocks is recovering after years of muted IPO activity, but also that issuers still have to offer generous discounts if they want to ensure strong trading — and also that investors will be receptive to future selldowns and IPOs.

“There’s a good IPO window now, but I’m a bit surprised that the market is so excited and there’s so much oversubscription when in some of the recent IPOs the discount to peers was not high. It seems investors want something new to invest in,” said Michael Gierse, a portfolio manager at Germany’s Union Investment who looked at all the recent major IPOs. “I’ll be happy to look at more IPOs, but investment banks will have to offer them at the right price.”

IPOs are typically priced at a discount to listed peers in order to entice investors to take a bet on an untested stock. Multiples are often based on projected future earnings, with analysts at the underwriting banks producing research for prospective buyers. Typical discounts had widened in recent years after rapid interest-rate increases all but froze the market, with a 2023 survey by KKR & Co. Inc. suggesting investors demanded discounts of 20% to 30%, steeper than the traditional 10% to 15% range.

All four of the recent major IPOs had cornerstones lined up to buy large chunks of the deal, boosting confidence and reducing the amount of shares bankers had to market. The high levels of demand and tight valuations for some transactions suggest fund managers are willing to open their wallets for certain assets after a drought of sizable IPOs in Europe for much of the year.

With no clear-cut comparable peers on the stock market, Verisure’s €3.2 billion IPO — Europe’s largest in three years — saw analysts and investors assess a wide range of public companies to arrive at the final valuation, according to people familiar with the matter.

The IPO priced just under the top of the marketed range, valuing the company at about 17 times its expected earnings before interest and tax for 2026, including net debt, said the people, who asked not to be identified because the information is private.

That was well ahead of US-traded security firm ADT Inc., but marked a discount to a broad set of peers in other industries such as business services firms like Diploma Plc and Experian Plc and Scandinavian serial acquirers like AddTech AB and Lifco AB, the people said. The deal drew strong support from domestic investors, which have helped make Stockholm Europe’s busiest IPO venue this year.

“We have an underlying strong market and investors are receptive to IPOs, and reasonably so, not least when it comes to well known companies such as Verisure,” said Mattias Isakson, head of strategy and investments at Swedbank AB. While interest will come down to the specifics of each deal, “opportunities for successful IPOs are good, given both the economy and market conditions,” he said.

Stockholm also gave a warm reception to lender Noba, whose owners have made full use of the overallotment option thanks to the rally in its shares. After postponing plans to go public in the first half of the year, Noba’s backers led by Nordic Capital opted to sell shares at a fixed price, which people familiar with the matter said marked a significant discount to peers including TF Bank AB and Cembra Money Bank AG.

“Noba Bank was the perfect IPO, there was a big discount to peers” because investors expected there would be more share sales in the future, Union Investment’s Gierse said. “They wanted to make sure that everyone makes money.”

The fact that NOBA and Verisure, in which their private equity backers retain major stakes, have performed better reflects buyout funds’ evolving attitudes toward pricing, market participants say.

“Most sponsors now are keen to see a robust performance on day one, as they focus on building a sustainable path for follow-ons execution,” according to Salvatore Branca, head of equity capital markets for Southern Europe, the Middle East and Africa at BNP Paribas SA, which acted on all four IPOs. A first-day gain of 10% or more is seen as ideal to insulate a stock against potential trading volatility and set the path for future stake sales, he said.

For the latest news on equity capital markets activity in Europe, the Middle East and Africa, follow the channel or visit NI BFWECMEU. To subscribe to ECM Watch, Bloomberg’s daily roundup of news from around the region, click here.

For their part, the owners of SMG sold shares at a limited discount to peers such as Baltic Classifieds Group Plc, the people said. The IPO, which drew north of 300 institutional bids, was supported by BlackRock Inc., the world’s largest money manager, and Switzerland’s Pictet Asset Management as cornerstone investors.

Family-owned Ottobock priced its IPO at the top of the marketed range, without much of a discount to its smaller Nordic competitor Embla Medical HF, according to people familiar with the matter. The German prosthetics maker’s deal was oversubscribed by roughly 10 times with more than 250 institutional orders, about 30% of which received no allocations.

Representatives for Noba Bank, Verisure and Ottobock declined to comment. A representative for SMG said that “the IPO price reflected a balanced view of SMG’s strong market position, robust growth track record, the unique monetisation potential and the quality of its platform model – while also taking into account broader market dynamics.”

–With assistance from Jonas Ekblom, Swetha Gopinath and Charles Daly.

©2025 Bloomberg L.P.