Volatility and Brexit fears mean fewer stock market flotations in 2018

The number of stock market flotations in Europe this year is set to be down 20 per cent on 2017 as initial public offering (IPO) activity is hit by volatility and Brexit, according to a report published on Thursday by PwC.

European IPO proceeds are also set to be down by a fifth and are expected to reach about €36 billion in 2018, well below the €45.1 billion raised last year, according to PwC’s IPO Watch Europe data.

“We can see that the ‘pause button’ has been hit for now,” said Denis O’Connor, partner at PwC Ireland.

“Uncertainty around trade between the US and China, the wider geopolitical climate and the potential end of the current bull run” have driven volatility in recent months, said Mr O’Connor. “Activity has been subdued across European exchanges for much of 2018, due to high market volatility and a significant correction to global indices in the first half of the year.”

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Postponed

A number of companies have postponed Dublin stock market flotations in recent months amid difficult market conditions. T5 Oil & Gas, an exploration company founded by a group of Tullow Oil veterans, postponed plans for a €39.7 million IPO, The Irish Times reported last month.

Other high-profile postponements included the delay until 2019 by private equity group Oaktree and Dublin-based Sigma Retail of Ireland's first retail real-estate investment trust (Reit) flotation. US private equity giant Lone Star also pushed back the planned €300 million IPO of Irish housebuilder DRes following October's global equities sell-off. Press-Up, the pub, restaurant and hotel group led by Paddy McKillen junior, mothballed plans for a flotation in October.

‘Wait and see’

There is “an air of ‘wait and see’” in the Irish market due to uncertainty resulting from Brexit, but “we see a number of companies in Ireland preparing for IPO in 2019”, said Mr O’Connor.

Of the European exchanges, the Deutsche Börse and London Stock Exchange saw the highest level of IPO activity, with flotations raising a total of €10.7 billion and €10.5 billion respectively. This was despite the Deutsche Börse hosting only 16 IPOs this year compared to the 75 that took place in London.

The Deutsche Börse was boosted by the two largest European IPOs of the year. Knorr-Bremse, the German brake systems manufacturer, raised €3.9 billion and medical technology company Siemens Healthineers floated for €3.7 billion.

Aston Martin was the largest new entrant on the London Stock Exchange, raising €1.2 billion following the luxury carmaker’s shaky stock market debut in October. The financial sector accounted for more than half of UK flotations in 2018.