A strong debut by Swiss skincare company Galderma (GALD.S) on Friday is steadying nerves around Europe's IPO market, a day after a poorly received listing from German retailer Douglas (DOU1.DE), bankers said.
Galderma's debut on the Zurich stock exchange marked Europe's biggest IPO since Porsche (P911_p.DE) in September 2022.
Its long-awaited listing comes as billions of dollars worth of European companies line up to go public.
Those hopes risked being dashed after shares in CVC-owned Douglas tumbled more than 12%.
Still, Galderma's shares soared above their issue price in the first hours of trading, while overnight in New York social media company Reddit (RDDT.N) saw its stock jump more than 48%.
"Sentiment around IPOs continues to be positive globally and in Europe, and those deals that are being prepared for Q2 and H2 are expected to come as planned," said Antoine de Guillenchmidt, co-head of equity capital markets at Goldman Sachs for Europe, the Middle East and Africa, who worked on the Galderma and Douglas IPOs.
The trading of these two private equity-owned firms was being closely watched by bankers and investors, after global IPO issues fell in 2023 for a second year.
As M&A volumes hit decade lows, pressure has built on buyout funds to sell companies, return money to investors and deploy freshly raised cash.
UNSOLD ASSETS
Private equity firms have been left with a staggering $3.2 trillion in unsold assets, restricting the return of capital back to their investors and having a chilling effect on fundraising, analysts at Bain & Co said.
But with central banks signalling an end to interest rate hikes, the stock market is becoming a viable exit route.
"Large private equity-backed transactions are a signal that IPO markets are receptive," said Markus Meier, head of ECM in Germany at Bank of America.
Europe has already seen some success stories this year.
Tank gear manufacturer Renk (R3NK.DE), the first newcomer to the Frankfurt Stock Exchange this year, has almost doubled its issue price of 15 euros since debuting in February. Its IPO was one of several postponed last autumn amid uncertainty around interest rates and geopolitical tensions.
After Renk's debut, Douglas and Galderma both accelerated their IPOs to take advantage of the positive mood.
CVC-owned Douglas raised 850 million euros ($920 million) to pay off debt. Shares were priced at 26 euros, the bottom of an indicated price range, and traded as low as 22.7 euros.
EQT-backed Galderma raised around to 2 billion Swiss francs ($2.23 billion), with its shares opening at 61 francs on the SIX Swiss Exchange, up 15% from the IPO's final price of 53 francs per share, which was the top end of its indicated price range.
CAUTION AHEAD
To be sure, Douglas will have left a sour taste for those investors who have lost money and could be a drag for some IPO candidates.
"We're still in the recovery phase, so we're not in an anything goes environment but a selective environment," said Martin Thorneycroft, head of cash ECM in EMEA at Morgan Stanley, which co-led the Galderma IPO.
Though caution remains, further new issues are to be expected, Julian Schulze De la Cruz, a capital markets lawyer at Noerr, said.
Private equity firm Permira has been preparing an IPO for Italian luxury brand Golden Goose - known for its worn looking sneakers - as soon as the second quarter. Apollo-backed lender OLB Bank has also said it is preparing to go public.
Fuel card provider DKV Mobility - another from CVC's portfolio after Douglas - is also waiting to come back after postponing its IPO plans last year.
CVC itself is expected to come to the market with an IPO worth more than 1 billion euros as soon as after Easter, a person familiar with the plan said.
($1 = 0.8987 Swiss francs)
($1 = 0.9241 euros)
