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Russia’s military attack on Ukraine has effectively shut Europe’s initial public offering market for now, just as bankers were gearing up for a busier March after a slow start to the year.
Among the large IPOs set to kick off in the coming months were Thyssenkrupp (DE:TKAG) electrolysis plant business Nucera, Eni SpA’s (OTC:EIPAF) renewables division Plenitude and Olam International Ltd.’s food unit.
But companies were already struggling to sell shares given the heightened market volatility triggered by tightening monetary policy. Now the escalating conflict in Ukraine adds to the darkening backdrop, making it unlikely big offerings can go ahead in the next few weeks.
“Timing is everything for an IPO,” said Susannah Streeter, analyst at Hargreaves Lansdown Plc. “Given the invasion in Ukraine has added to fuel to the volatility we have seen on financial markets since the start of the year, plans for fresh offerings are likely to be shelved until calm returns.”
About $3 billion worth of IPOs have priced on European exchanges this year, an 80% drop from the same period in 2021, data compiled by Bloomberg show. Several listing plans were scrapped, while those that braved volatile markets had to temper their valuation expectations to appease cautious investors.
“I would be surprised if many IPOs proceeded in the current tense environment,” said Gavin Launder, a fund manager at Legal & General Investment Management. “Europe will be more worried than the rest of the world due to proximity.”
The near-term calendar in Europe was already threadbare, with Italian green hydrogen specialist Industrie De Nora SpA the only notable deal in the market.
No market maker likes uncertainty when pricing an IPO, said Paul Go, global IPO leader at EY. “In the very short term, some of the bigger deals looking for a certain minimum valuation will be put on hold until the situation becomes clearer and stabilizes.”
It’s not just Europe’s IPOs that will be curtailed. Offerings in Asia, which have suffered from valuation mismatches between buyers and sellers this year, are likely to be affected.
The outlook for March IPOs in Asia “is not great,” said Brian Freitas, an Auckland-based analyst for independent research platform Smartkarma. “There could be more IPO plans shelved until the Ukraine situation settles down.”
©2022 Bloomberg L.P.
