However, the epicenter of financials’ IPOs this year may be found in Germany as Deutsche Bank is considering a partial initial public offering of its asset management unit, Deutsche Asset Management.
“Deutsche AM’s IPO is obviously a big case, very similar to Amundi, we will look at. We will see which form will take the listing, whether it is a normal or a dual-track IPO. If Deutsche AM gets listed, it is likely that the trade will be crowded as worldwide investors will want to invest it.
“It is a way for foreign investors to come back on European equity markets. The consolidation of the asset management industry is an interesting trend. Firms are running a growth and size race,” Morvillez analyses.
Huge IPO wave to expect in Europe
The European IPO market is also set to be a massive pipeline of IPOs in 2017.
Skylar’s fund manager points out that in addition to the listings that were planned for 2017, several firms that have postponed their IPOs last year due to market volatility will get listed such as the French optician Alain Afflelou.
“Private equity funds need to make some turnover in their portfolios. They have restructured firms bought during the crisis and will list them over the next semesters. They will be huge suppliers of IPOs in Europe. Also governments are still selling assets to deleverage their balance sheets. Some examples in the last couple of years include Dong Energy (Denmark), Enav (Italy), ABN Amro and ASR Nederland NV (Netherlands). A third driver is the sale of non-core assets by major companies. Two “spin-offs” illustrate the trend : Uniper that spun off from E.O.N last September and Innogy, part of RWE,” Morvillez explains.
EY’s Q4 2016 report on global IPO trends suggested that 2017 is not likely to see a significant recovery in the market activity level though.
“The key question of course is whether European issuers will be prepared to weather the political risk and uncertainties and go ahead with their IPO transaction, placing their business and leadership in the full glow of public scrutiny, or whether they stick with more conservative strategic options,”
Among highly possible candidates announced for listings in 2017 remain French ride-sharing company BlaBlaCar and British take away online platform Deliveroo.
Morvillez foresees the UK IPO market will face a quiet year, suffering from the post-Brexit market environment that is likely to reduce dramatically the number of IPOs on the London Stock Exchange.
EY said that in the post-Brexit market environment, many IPOs in the UK have had to be priced toward the lower end of their price range in order to draw investors.
Its Q4 2016 report has found out this lower pricing has led to a number of potential IPOs being withdrawn from the market in the fourth quarter and has been a significant factor in the lower levels of IPO activity in the latter part of 2016.
But the consultant said “many of the businesses that have put their listing plans on hold have not yet revised their IPO timetables.” Ups and downs of the sterling do not help the UK IPO market.
“Low pricing, the faltering of the post-Brexit equity market rally and ongoing uncertainty about what the UK economy will look like outside the EU have all contributed to a “wait-and-see” approach among many IPO candidates. We believe a significant improvement in IPO activity is unlikely until uncertainty dissipates once the Presidential transition has taken place in the US and the UK has formalized its EU exit strategy,” it added.
A last trend Skylar’s Morvillez observes in the IPO markets globally is that some companies raise capital from private pools of investors at a share price that exceeds the share price range announced publicly for the IPO.
“Normally it is the opposite, the public price is higher than the private one. This trend should normalise over the coming years, and a lot of companies that wanted to do a last round of private funding will choose to go public instead,” the fund manager concludes.