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 last year, reflecting a less-favorable market backdrop, hesitancy ahead of key central-bank decisions and a late Labor Day holiday.
The prospect of rising interest rates and inflation, along with unrelenting geopolitical instability, makes the outlook for the fourth quarter little rosier. And with the pipeline of European 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 AI infrastructure. European bourses saw $89 billion 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 $1.7 billion through separate stock sales to help fund deals and growth. Bankers argue 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.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing