IPOs go from winners to losers in Europe as stock rout deepens

[LONDON] Many of this year's biggest initial public offerings in Europe are now trading in the red, as surging bond yields prompt investors to dump highly valued growth shares.

More than 40 per cent of Europe's initial share sales that raised more than US$500 million are now under water, according to data compiled by Bloomberg. British bootmaker Dr Martens on Wednesday joined the list, dipping below the IPO price for the first time since its London debut in January.

So-called pandemic winners have dominated Europe's IPO market this year, capitalising on a shift toward online sales and services with lofty valuations.

But spiking bond yields are now spurring a rapid reverse out of fast-growing and expensive stocks. "A mid-year rotation into growth stocks has been overwhelmed by the recent surge in bond yields," said Paul O'Connor, head of multi-asset at Janus Henderson in London.

IPOs tend to be vulnerable when risk appetite dips, "as they are usually among the first names that investors unload," he said.

Many of the worst-hit IPO stocks initially surged after going public. In just over a year of trading, online shopping emporium THG went from a gain of as much as 60 per cent to plunging 17 per cent below its listing price after ten consecutive sessions in the red.

The shift in market sentiment is also affecting new listing hopefuls. Pulled IPOs are piling up across the globe as investors turn cautious in the face of choppy markets and a glut of deals. Some issuers are tempering their valuation expectations in an effort to make their share sales more attractive to picky buyers.

BLOOMBERG