European IPO market healthiest in years

8 Jul 2004

With some 95 initial public offerings (IPOs) the second quarter boasted the strongest performance in the European IPO market in years, compared with only 23 in the same quarter last year, PricewaterhouseCoopers’ IPO Watch Europe survey found. Despite the strong performance, experts say there is no sign of a return to the boom.

There were some 95 IPOs between 1 April and 30 June and 54 in the preceding quarter. In the first quarter of the year, Eircom raised €296m and in the second quarter drinks company C&C Group raised €385m. In May, Kerry-based online hotel reservations company CNG raised €33m on the AIM market in London.

However, although the majority of Irish activity on the IPO front was communications and internet-based, PricewaterhouseCoopers’ Dublin partner Joe Tynan warned that sentiment in Europe was more in favour of traditional companies that are capable of generating cash as opposed to loss-making technology plays.

Tynan explained: “The last quarter was the strongest for IPOs in Europe for a number of years. It would seem that successful IPO candidates continue to be the more traditional companies generating profits and cash but there is no sign of a return to the dotcom boom.”

The total offering value of IPOs in Europe in the second quarter was €8.7bn, more than five times as much as the €1.5bn in the same period of 2003 and also well up on the €5.2bn figure for the first three months of this year. This is partly explained by three high value IPOs during the latest quarter: Deutsche Postbank (raising €1.4bn on the Deutsche Börse), the electricity company Terna (€1.2bn on the Borsa Italiana) and aerospace company Snecma (€1.1bn on Euronext). Together they accounted for close to half of the total offering value on all exchanges.

London continued to grow its overall market share. Its 65 IPOs accounted for 68pc of total offerings by volume in the last quarter. In value terms its IPOs increased to €2.4bn from €767m in the second quarter of 2003. The smaller companies market AIM continued to dominate with 56 of the 65.

Among the new member states of the European Union, it was again Warsaw that showed signs of promise with five IPOs in the quarter, one more than the previous quarter. In addition, the Prague stock exchange saw its first IPO for more than a decade with the dual listing (also in London) of the pharmaceuticals company Zentiva.

From the sector point of view, support services and real estate saw the largest increases with ten and nine IPOs respectively in the first quarter of this year, compared to just one and none in the same period of 2003. Electronic & Electrical Equipment went from just one IPO in Q1 2004 to seven this quarter, while Utilities experienced a drop in the number of IPOs from three in Q2 2003 to one in Q2 2004.

Looking at market prospects, Tom Troubridge of PricewaterhouseCoopers London Capital Markets Group added: “The IPO pipeline is good across Europe’s major markets and the recovery we’ve seen in 2004 so far should continue into the second half of the year. The Deutsche Börse has ended its IPO drought and we can expect more activity on the German market. Warsaw is proving the most active of the European Union accession states markets with a strong pipeline, albeit the amounts of money being raised are relatively modest compared with larger markets.”

By John Kennedy