PARIS: After a bumper first half for European equity offerings, business has become tougher for the region’s dealmakers as market jitters start to surface.
The volume of share sales declined about 20% year-on-year in the third quarter, according to data compiled by Bloomberg.
September was quieter than it was last year, reflecting a less-favourable market backdrop, hesitancy ahead of key central-bank decisions and a late Labour Day holiday, the traditional starting point of the autumn deals window.
The prospect of rising interest rates and inflation makes the outlook for the fourth quarter little rosier.
And with the pipeline of European initial public offerings (IPOs) starting to thin, dealmakers will be counting on resilient stock prices and corporate earnings to maintain elevated levels of capital raising and investor demand.
“While headline indices are near all-time highs and VIX is fairly benign, there are clearly concerns underneath the surface around things like rates, inflation, geopolitics,” said Ashish Jhajharia, head of equity capital markets for Europe, Middle East and Africa at JPMorgan Chase & Co.
Momentum has slowed since a first half marked by buoyant equity issuance as companies sought to fund a splurge in spending on acquisitions, power grids and artificial intelligence infrastructure.
European bourses saw US$89bil of stock sales in the first six months of the year, 36% higher than a year ago, according to data compiled by Bloomberg.
Not that offerings have dried up completely. Last week, the UK’s Land Securities Group Plc, France’s Rexel SA and Belgium’s Warehouses De Pauw raised a combined US$1.7bil through separate stock sales to help fund deals and growth.
Bankers argued that the investment case behind a corporate fundraising drive that has defined much of the year is still intact and will help sustain activity in coming months, even in the face of tightening monetary policy and concerns around artificial intelligence.
The resilience of European company earnings will be another key factor in making equity deals attractive. Earnings for MSCI Europe firms jumped 18% in the second quarter, the strongest showing since mid-2022, according to data compiled by Bloomberg Intelligence.
Clues on the sustainability of that will be provided in the upcoming results season, with a lot of optimism already baked into the region’s equities.
“Higher interest rates are less supportive for equities, but resilient earnings provide an important counterweight,” said James Palmer, head of Europe, Middle East, and Africa (EMEA) enterprise content management (ECM) at Bank of America Corp.
He expects investors to continue to back offerings from businesses with compelling fundamentals, including new listings.
For initial public offerings (IPOs), the short-term outlook is more muddled. While Airtel Mobile Commerce NV is pressing on with plans to go public in what could be London’s largest IPO in five years, some companies have pushed back plans until market conditions improve.
“ECM in Europe this year has been a lot less about IPOs,” said Ed Sankey, head of international ECM at Citigroup Inc.
He expects capital increases and other issuance from publicly traded companies to dominate the remaining months of 2026, before a revival in the IPO market next year. — Bloomberg
