The European Initial Public Offering (IPO) landscape is facing unprecedented challenges, reminiscent of the post-global financial crisis period.

Recent data released by the Association for Financial Markets in Europe (AFME) revealed sobering statistics: only 34 companies went public in Europe during the first half of this year, marking the lowest level since 2009. Simultaneously, companies raised approximately €2.4 billion through IPOs, representing a staggering decline of 42% year-on-year, the lowest it has been in 14 years.

Richard Spilsbury, a partner in PwC’s UK capital markets division, candidly remarked, “IPO activity is substantially lacking.”

Media analysts point towards soaring interest rates and record-high inflation as primary factors compelling many businesses to postpone their IPO intentions

Compounding this scenario is the waning appeal of European equities as American markets gain traction, providing a more lucrative funding environment.

Decline in IPO Enthusiasm

The decline in both the number of IPOs and the capital raised has fed a sense of anxiety throughout the European marketIn an effort to reverse this trend, policymakers in Europe are embarking on a series of reforms: the UK is poised to implement a variety of measures aimed at channeling capital towards high-growth companies; concurrently, the EU is working on simplifying the listing process and elevating the visibility of smaller enterprises among investors.

Among the few firms that have successfully navigated the IPO waters, only a handful experienced the strong initial boost and stabilizing post-listing trading that underwriters aim to achieve

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Richard Spilsbury noted that the stock performance of newly listed companies has been “overall quite poor,” quashing further engagement from fund managers in new offerings.

An analysis by Reuters Breakingviews of ten larger publicly traded firms revealed that half are trading below their IPO pricesSince their listings, these companies have averaged a mere 3% increase in their share prices, while the STOXX 600 index in Europe has seen gains nearing 10% by the end of JulyThis stark juxtaposition illustrates the considerable disappointment in post-IPO performance.

Specifically, London's largest IPO this year, the fintech company CAB Payments, raised approximately £300 million but saw its stock plummet nearly 10% on its first trading day.

Numerous European firms have strived to identify the right timing for their public offerings, only to ultimately decide to withdraw or delay

Italian software company Maggioli SpA, together with shareholder Pacri Srl, recently scrapped its Milan IPO plans, citing unsatisfactory market conditions that could not yield a "satisfactory valuation." In Germany, energy storage provider Intilion postponed its IPO in July for similar valuation concernsMeanwhile, WE Soda, a Turkish ash producer, cancelled its London IPO plans in mid-June, with disappointment voiced by CEO Alasdair Warren regarding the perceived low valuation by investors.

Given these circumstances, experts predict that the near-freeze in the European IPO market will lingerBankers anticipate that demand-sensitive merger funds will defer listing large European enterprises for the remainder of this year.

For instance, Swedish private equity firm EQT has recently shifted its focus towards a private placement for Swiss skincare company Galderma, affording Galderma additional time before pursuing its long-awaited IPO, with potential valuations expected to exceed $20 billion.

In a similar vein, Reuters reports that Schott AG’s medical glass division Schott Pharma is preparing for an IPO in Frankfurt following the close of summer; while defense contractor Renk aims to secure a late-year listing, conditional upon excluding the likelihood of a private sale by its private equity owners Triton.

Bank of America expresses skepticism about a revival in European IPO activity

The bank's head of equity capital markets for Europe, the Middle East, and Africa, James Palmer, remarked that historical data indicates that periods of downturn in the IPO market can extend over two years prior to any substantial recovery“It appears that history is repeating itself,” he commented.

Palmer further elaborated, stating, “This will be a gradual recovery rather than a rush of transactionsWhile overall indices are performing well, beneath the surface, many individual stocks are exhibiting complex trajectories.”

A Shift Toward America

Amid these difficulties in retaining high-growth firms, many are redirecting their focus to the United States

For them, the American market presents a larger pool of capital, with investors showing a greater propensity to embrace risk and provide funding to nascent enterprises.

Data from Dealogic illustrates that the slowdown confronting the U.SIPO market has been notably milder this year, with 75 companies going public and raising $11.5 billion in the first half, marking it the lowest number and value since 2015.

This year, several companies, including chipmaker ARM, have opted to list in the U.Srather than their domestic markets.

ARM, backed by SoftBank Group and headquartered in Cambridge, UK, is reported to have plans for an IPO on Nasdaq as early as September, with a target valuation ranging from $60 to $70 billion

It is poised to be one of the largest IPOs in the U.Smarket in the past two years, especially capitalizing on the ongoing buzz surrounding artificial intelligence.

In May, global mining giant AngloGold Ashanti announced intentions to shift its primary listing to New York while retaining Johannesburg and Ghana as secondary markets.

CEO Alberto Calderon highlighted that New York had long served as the company's secondary marketTransitioning to New York as the primary listing location enables AngloGold to tap into “the world's largest capital market and pool of gold investors,” asserting that being listed in London would hamper the stock’s liquidity.

Historically, London has been a traditional listing ground for many large mining companies globally; however, this shift signals a dwindling allure of London against the backdrop of an increasingly appealing Wall Street.

Companies already listed on European exchanges are also contemplating a pivot to U.S

markets.

Irish construction materials firm CRH is planning to relocate its primary listing to the United States while delisting from the Dublin Euro Next exchangeNonetheless, the company will maintain its listing on the London Stock Exchange, with the transition expected to take effect by September 25.

CRH has disclosed that nearly three-quarters of its revenue is generated within the North American market, which is anticipated to be the main catalyst for its future growthSuch a change is perceived as a means to unlock greater commercial, operational, and acquisition prospects, while delivering higher profitability and dividends for its shareholders.

Additionally, executives at Shell have indicated earlier this year that they considered a move of their headquarters to the U.S.

“Some European companies are increasingly inclined to pursue listings abroad, as U.S