European IPOs plummet in the aftermath of Brexit

19 Jul 201619 Shares

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Markets are spooked by Brexit and this is impacting the flow of, and proceeds from, IPOs

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The European market for initial public offering (IPOs) has been hit by the fallout of the UK’s exit from the EU with Q2 European IPO proceeds plummeting 26pc on last year.

According to the latest PwC data, European IPO proceeds in the second quarter were affected by global uncertainties including the EU referendum.

PwC’s latest IPO Watch predicts European IPO proceeds are unlikely to exceed €25bn by the end of 2016. This is less than half of 2015 when €57.4bn was raised.

‘This referendum result has major implications for Irish companies with exposure to the UK. This was reflected by the steep falls in the share price of those companies immediately post the referendum result’
– DENIS O’CONNOR, PWC

Total proceeds for H1 amounted to €14.4bn, representing less than half of the activity observed during the highs of 2014 to 2015.

Activity in Q2, however, tripled compared to Q1 2016, despite the EU referendum in the UK impacting volume across the continent. Overall, 95 European IPOs raised €10.9bn this quarter, compared to 50 IPOs raising €3.5bn in Q1 2016.

London was especially impacted, down 75pc to €1.2bn (£0.9bn) and representing only 11pc of European activity.

The rest of Europe fared better with IPO proceeds only down 6pc to €9.7bn.

Markets spooked by Brexit

However, PwC says it expects IPO candidates to return gradually to the market towards the end of the year and early 2017, provided investor confidence improves and market uncertainties subside.

“Companies, investors and bankers are all still grappling with what the EU referendum result means for the UK economy as well as the rest of the EU,” said Denis O’Connor, transaction services partner at PwC Ireland.

“Due to the significant trade between Ireland and the UK, this referendum result has major implications for Irish companies with exposure to the UK. This was reflected by the steep falls in the share price of those companies immediately post the referendum result. Following the initial tumble, the FTSE 100 has recovered whilst the FTSE 250 continues to be hampered by concerns over the UK economy.

“The financial services sector has been hit hardest along with a broader impact on domestic UK businesses. Over the coming quarters, I expect investors to favour IPO candidates with a global exposure and/or offering steady yields,” O’Connor added.

London image via Shutterstock

Editor John Kennedy is an award-winning technology journalist.

editorial@siliconrepublic.com