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Political uncertainty causes market slump, dark outlook for European IPO market

TraderKnows
TraderKnows
06-24

Several countries in the European political arena have recently been plunged into crisis, with political turmoil spilling over into the economy, severely impacting the prospects of IPOs.

Bankers indicate that due to political uncertainties disrupting the market, the European IPO market is unlikely to see any new candidates before summer.

This week, Italian luxury sneaker brand Golden Goose and Spanish fashion retailer Tendam both delayed their planned listings, citing market impacts from the sudden French election.

Last week, after the far-right suffered a significant defeat in European Union elections, France announced the election, leading to a drop in the euro, a decline in French blue-chip stocks, and a fall in bond prices.

However, several bankers emphasized that the market is not entirely closed, as stock sales have picked up this year. For instance, frozen bakery goods company Europastry announced this week that it plans to list in Spain, raising at least €225 million.

“I don’t think the market is closed, but it’s certainly a setback for an IPO market that was just starting to recover,” said Andreas Bernstorff, Head of Equity Capital Markets at BNP Paribas.

Despite ongoing political uncertainties potentially reducing IPO candidates and delaying some plans to 2025, stock sales by already listed companies will continue, bankers say. This week, investors remained interested in bulk trades, with around $150 million of Momentum Metropolitan stocks sold in Johannesburg.

“The volatility we’ve seen recently triggered by the French election is more likely to affect trades sensitive to the macroeconomic environment on the European continent, but the positive debate around growth-promoting policies in Europe could also boost investor sentiment,” said Alex Watkins, Co-Head of International Equity Capital Markets at JP Morgan.

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Initial Public Offering

An Initial Public Offering (IPO) refers to the process by which a private company issues shares of stock to the public for the first time, allowing it to be listed and traded on a stock exchange.

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