London beats Brexit and pandemic woes to top Europe's IPO charts

[LONDON] The European market for initial public offerings (IPOs) defied the coronavirus crisis and nail-biting Brexit negotiations this year, led by a slew of offerings in London from companies that benefited from pandemic-induced lockdowns.

European exchanges hosted 160 IPOs and counting, worth a combined US$28.3 billion, surpassing the US$26.7 billion raised over 136 listings in 2019, according to data compiled by Bloomberg. This remains only a fraction of global issuance, blown out of the water by the 885 deals worth US$134 billion in the Asia-Pacific region and the record-busting US$173 billion raised in 479 US deals.

While Norway saw the most deals, London accounted for more than a third of Europe's proceeds, with 32 deals worth US$11.3 billion, up a fifth from last year's poor showing. This includes international issuers, like Kazakhstan's online retail bank Kaspi.kz and two billion-dollar listings by Chinese companies, though the biggest debut came from online shopping emporium THG Holdings, a rare sizable domestic float.

Next year may bring more home turf listings, as even the possibility of a rocky exit from the European Union isn't curtailing excitement. "What we are starting to see in 2021 is that the UK proportion of the pipeline is looking stronger than usual," said Charlie Walker, head of equity and fixed income primary markets at the London Stock Exchange.

This, despite the poor relative performance of UK stock markets. The FTSE 100 index is down 13 per cent in 2020, more than double the 5.3 per cent dip in the Stoxx Europe 600, while the more domestically oriented FTSE 250 benchmark has slumped 9.1 per cent. And the British economy is facing its worst recession in centuries.

Still, with the Brexit roller-coaster ride started in 2016 getting close to an end, London's prospects seem brighter. "For next year, there is the expectation that there won't be those sorts of markers in the calendar that create volatility," Mr Walker said.

And some big names are already waiting in the wings. UK food-delivery startup Deliveroo is said to be exploring a listing in London next year, after stuck-at-home customers turned to its app to order takeout meals, while cybersecurity company Darktrace is said to have hired banks for an IPO in the City.

There is no doubt the UK could do with more new stocks to beef up its fast-shrinking market. Even the government has taken note, launching a review of listing rules in November, looking for ways to boost London's appeal to tech and innovative firms and strengthen its standing as a global financial centre.

NORDIC MIGHT

While London has attracted most of the money, it is not the busiest venue, with Oslo clinching that title this year. Norway's IPO market thundered out of relative obscurity, snagging a record 34 deals, nearly six times as many as in 2019, the data shows. And at least three more are set to add to the tally before the year is up.

The surging activity on Oslo's growth market, digitisation of the IPO process during the pandemic and the prevalence of cornerstone investors, previously more common in Swedish deals, all came together to lead to the boom in listings, said Magnus Kvinge, head of equity capital markets for Norway at ABG Sundal Collier.

Sweden came in third after London, winning 29 IPOs worth US$2.6 billion. "Since our markets are primarily driven by growth companies and tech, many have benefited from a high interest in investing in these sectors at this stage" given the acceleration of digitisation during the pandemic, said Adam Kostyal, head of European listings at Nasdaq.

Other fringe markets stormed up the regional league table, with Warsaw bagging a top five finish thanks to its largest listing on record: Allegro.eu's October float. Poland's IPO market has burst to life, with everything from gaming companies, boosted by lockdown-fuelled frenzy for digital distraction, to online retailers selling bikes and clothes lining up to list.

FRANCE, GERMANY FLOUNDER

Not every country was able to outshine last year's performance, however. Italy's fall from grace is particularly acute. Only last year, it was Europe's most active venue with 35 IPOs worth US$2.9 billion. That has since whittled down to a US$745 million market.

Traditional behemoth Germany only scraped together US$1.3 billion, less than a third of 2019's proceeds, while France recorded even bigger losses. After previously bringing in deals worth US$3.2 billion, Paris has hosted less than US$600 million of new floats this year. Half of that came from a blank-cheque firm listed by French billionaire Xavier Niel and two other partners last week.

Yet, next year is looking better, with some substantial deals in the works. French cloud-computing provider OVH Groupe is said to be preparing a potential IPO for early 2021, while pharmaceuticals giant Sanofi and utility Engie are said to be exploring options for some units, which could result in listings. Meanwhile, private equity backers are said to mull listings for German cybersecurity firm Utimaco and enterprise software developer SUSE.

"We have a really healthy IPO pipeline, probably stronger than we have seen since the disruption caused by Brexit issues several years ago," said Rob Leach, European head of equity capital markets at Jefferies.

BLOOMBERG