Ukraine crisis and market jitters threaten European IPOs

March was going to be a busy period for stock market debuts in Europe, but Russia’s decision to redraw the borders in Ukraine and market uncertainty due to the escalating security crisis on the continent are causing companies to freeze their plans to go public.

Funds raised so far this year by companies going public in Europe, the Middle East and Africa are down 79% to $3.1 billion from the same period last year, when companies raised $15.1 billion in which was a record year for capital markets activity in the region, according to Refinitiv data.

Rising stock markets have driven the market for IPOs in recent years. However, with COVID-19 response measures driving up inflation, an increasingly tense economic environment is reducing investors’ risk appetite for new names.

Expectations pointed to a very active March for public offerings for the sale (IPO) of shares this year, after several operations were postponed from the end of 2021.

March typically marks the start of IPO season, as most companies wait until the close of their financial year to bolster their IPO prospectus with their latest results.

However, these operations are currently under pressure, as the United States and its European allies are about to announce new sanctions against Russia, after President Vladimir Putin formally recognized two breakaway regions in eastern Ukraine, which is a blow to the diplomatic solution of the crisis.

“I suspect there will be a significant disruption and delay in IPO operations because of what has happened. Many companies are taking a step back, observing this situation and waiting before going public“, said kasper elmgreenhead of equities at the French asset management company amundi.

Several European companies, including the Spanish bank Ibercajahave put aside the big IPOs after having officially started the process.

On January 27, the Dutch file transfer service WeTransfer scrapped an IPO in Amsterdam that would have valued it between 629 million and 716 million euros.

The German manufacturer of prosthetics ottobock it waits until September to launch its multimillion-dollar IPO, which adds to a series of operations that have been delayed in recent weeks.

Fears that the Russian government of Vladimir Putin will launch a full-scale invasion of Ukraine have taken their toll.

“Any market driven at the pace of headlines is tough, and the impact is negative with respect to increased risksaid Andrew Briscoe, head of Investment Markets for Europe, the Middle East and Africa at Bank of America. “Naturally, there will be delays and some will have to be a little more agile when it comes to timelines.”

Several bankers said larger operations, which offer greater access to liquidity and high-quality assets, are likely to go ahead, but some operations are on hold until the situation stabilizes.

“Whether it’s a large cap or a small cap, it will certainly cause most issuers to stop and take stock, especially when it comes to an IPO and a four-week process, and things are changing. day to day”, commented a second banker who manages IPOs in Europe.

Adding to market volatility, the poor performance of some of last year’s IPOs is adding to investor pessimism, with companies like Deliveroo and Alphawave trading well below their IPO price.

The FTSE Renaissance IPO Index for Europe, the Middle East and Africa is down 23.5% so far this year.

Norwegian hydrocarbons company Var Energi completed a 77 billion NOK IPO last week, but shares closed 2.3% below the asking price on Monday.

“If an investor is already quite concerned about the state of their current portfolio, they are often not in the right mindset to invest in an IPO”, declared a senior banking official of the European capital markets.