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Banks are speeding up the marketing period for initial public offerings in Europe, in an effort to shield new listings from the turbulence that has rocked global equity markets during Donald Trump’s first year back in the White House.
The average number of bookbuilding days — when banks invite bids from investors after an IPO has been publicly announced — for European listings has dropped to a record low of five so far this year, down from 10 in 2022, according to data from Dealogic. That has been driven by nervousness that a bigger window risks exposing the IPO to sudden market volatility,
Prague-based Czechoslovak Group (CSG), Europe’s biggest ever defence IPO, which bagged a €33bn valuation on its first day of trading in Amsterdam last month, had a bookbuilding period of just three days.
Austria’s Asta Energy was marketed for just four days, going on to soar 46 per cent on its first day of trading in Frankfurt at the end of January.
“The name of the game in European IPOs since the end of the financial crisis has been de-risking,” said Antoine Noblot, head of equity capital markets for northern Emea at BNP Paribas.
Bookbuilding periods have compressed globally, not just in Europe, since the 2008 financial crisis. The Covid-19 pandemic, with its virtual investor meetings, marked another move in the same direction. Dealogic data for the US shows the average length of the marketing period falling to close to a record low so far this year.
But particularly strong investor demand for European assets has allowed banks to shrink bookbuilding windows and focus on engaging with potential investors in the months leading up to a public announcement. The tactic has been increasingly successful as assets have become concentrated in the hands of a small number of huge investment firms.
Noblot, who worked on the CSG deal, said BNPP engaged with more than 150 investors for several months ahead of the formal bookbuilding period.
“We had our own little private IPO going on,” he said, meaning the bank already had a clear sense of the likely price and who the “top 20 to 30” investors would be by the time the listing was publicly announced.
“Markets are volatile and uncertain,” he added. “Does it really make that much sense to spend that much time in the market when everyone is tripping over themselves to place orders with you? It comes at the cost of exposing you to market risk.”
Global markets plunged last year in the wake of US President Trump’s sweeping “liberation day” tariffs, putting global dealmaking on hold as companies rushed to understand the impact of the levies. Already this year, markets have been rocked by Trump’s attempts to acquire Greenland, which sparked a political crisis in Europe.
In the latest example of jittery markets throwing IPO plans off course, software group Visma is considering delaying its London IPO after the sector suffered a sell-off in equity markets this week. On Wall Street, software provider Liftoff Mobile postponed its IPO this week, blaming “market conditions” after the stock market rout sent its peers’ share prices plummeting.
“Everybody is trying to keep execution windows tighter, to be less exposed if something unexpected hits the market,” said Anvita Arora, global co-head of equity capital markets at Société Générale.
Banks have been helped in their efforts to accelerate bookbuildings by a trend among global investors to diversify portfolios that had tended to be heavily skewed towards the US, often looking towards Europe instead.
Luca Erpici, head of Emea equity capital markets at Jefferies, which worked on the CSG IPO, said: “We were where we wanted to be, so there was no need to take any more market risk.” At the time of the IPO, European defence stocks were enjoying the latest leg in a multiyear rally.
The strong level of demand has allowed IPOs increasingly to secure so-called cornerstone investors, building another layer of security into the process by locking in an agreed amount of the offering, although this can reduce flexibility later on given that a large allocation is already spoken for.
Asta Energy secured four cornerstone investors — Siemens Energy, BNPP Asset Management, Invesco Asset Management and WCM Investment Management — to commit a total of €55mn to its €125mn deal last week. The CSG deal saw BlackRock and a subsidiary of the Qatar Investment Authority commit €900mn.
“The current mood is very much ‘let’s get it done and secured before we broaden things out’,” said SocGen’s Arora.
The formula of a short bookbuilding phase along with cornerstone support has echoes of the European IPO market during the coronavirus pandemic, as listings began to return in 2020 and 2021 following earlier market turmoil.
Coffee group JDE Peet, the biggest European IPO in 2020, secured cornerstone investment for more than half of the proceeds of the deal, as did London’s biggest listing that year, The Hut Group. The two IPOs were marketed publicly for three and four days respectively.
“The marketing of IPOs has substantially shifted to private-side marketing,” said Stephane Gruffat, global head equity capital markets syndicate at Deutsche Bank.
“In some instances we can completely truncate the formal bookbuild, almost everything’s done before we publicly announce the deal.”
