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Higher Rates Cool European Equity Deals After Strong First Half
European companies sold fewer shares in the third quarter than they did a year earlier.
This followed a busy first half, when companies raised $89 billion by selling stock.
Higher interest rates, inflation worries and world events have made investors more cautious.
Some companies still raised money recently to support deals and growth.
Bankers say strong company earnings could help keep investors interested.
But companies planning to go public may wait for better conditions, and investors are paying close attention to valuations.
Convertible bonds have also become more attractive to some companies as borrowing costs rise.
Bankers remain hopeful that companies will continue to raise money, even if the IPO market takes longer to recover.
European share-sale volume fell about 20% year-on-year in the third quarter after a strong first half.
The region recorded $89 billion in stock sales during the first half, 36% more than a year earlier.
Dealmakers cited interest-rate and inflation concerns, geopolitical uncertainty and caution ahead of central-bank decisions.
Recent offerings by Land Securities, Rexel and Warehouses De Pauw raised a combined $1.7 billion.
Bankers expect listed-company fundraising to remain active, while IPO plans face valuation concerns and uncertain market conditions.
- Who
- European companies seeking equity financing, dealmakers and investors.
- What
- European equity offerings slowed in the third quarter, while listed-company fundraising and convertible-bond deals continued.
- Where
- Europe.
- When
- The third quarter and outlook for the remaining months of 2026.
- Why
- Higher-rate and inflation concerns, geopolitical uncertainty and investor caution have made equity offerings more difficult.
Reasons for caution
Reasons for optimism
Market conditions
Reasons for caution
Higher interest rates, inflation concerns and geopolitical instability could undermine investor demand and derail deal plans.
Reasons for optimism
Bankers say resilient earnings and continued corporate funding needs can support offerings despite tighter monetary policy.
IPO timing and pricing
Reasons for caution
Some companies have postponed IPO plans, and recent listing losses have made investors more sensitive to valuation.
Reasons for optimism
Fund managers remain willing to support credible growth stories, and some bankers argue companies may need to proceed without waiting for a perfect market window.
Key facts
- Third-quarter share sales
- Volume declined about 20% year-on-year.
- First-half stock sales
- $89 billion, 36% higher than a year earlier.
- Recent offerings
- Land Securities, Rexel and Warehouses De Pauw raised a combined $1.7 billion.
- European earnings
- MSCI Europe company earnings rose 18% in the second quarter, the strongest showing since mid-2022.
- Recent IPO returns
- European listings from the prior 12 months averaged a negative 17% return, according to Bloomberg data cited in the article.
- Schneider Electric fundraising
- The company said it would raise up to €6 billion to help pay for its acquisition of PTC.
- IPO outlook
- Airtel Mobile Commerce was pressing ahead with plans for a London listing; the article said it could be the city's largest IPO in five years.
Quotes
Ashish Jhajharia
JPMorgan Chase’s head of equity capital markets for Europe, Middle East and Africa
“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.”
livemint.com
Silvia Viviano
UniCredit’s head of equity capital markets
“Cash ECM is a bit of a buyers’ market, and it’s imperative to make deals that work for investors.”
livemint.com
Lawrence Jamieson
Barclays’ co-head of EMEA equity capital markets
“Central bank reactions to inflation have been largely in line with expectations, but the geopolitical backdrop in the Middle East continues to wax and wane, as does the rates outlook.”
livemint.com
Sources
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