European fundraising suffers worst quarter since dotcom crash due to Ukraine war

By Andres Gonzalez
MADRID, March 31 (Reuters) – European equity markets
suffered their worst quarter in more than two decades at the
start of 2022 as economic worries were exacerbated by the war in
Ukraine.
Proceeds from equity capital markets in Europe were $10.6
billion, down 83% from last year and the lowest figure since
2000 when the dotcom bubble burst, spooking investors for years,
according Refinitiv data up to March 21.
While market turmoil has affected corporates worldwide,
Europe has suffered the most, with proceeds from initial public
offerings (IPO) falling by 58% worldwide, compared to 88% in
Europe.
“From January onwards, the market has been dealing with the
change in expectations towards interest rates, the conflict in
Ukraine and the situation in Asia, with Covid-19 and the
potential impact on supply chain,” said Nick Koemtzopoulos, Head
of EMEA Equity Capital Markets at Credit Suisse.
Companies including Swiss skin care firm Galderma, Spanish
lender Ibercaja and warehouse management firm Mecalux postponed
plans to tap investors’ appetite due to the market uncertainty
aggravated by the war in Ukraine.
The March window was initially expected to generate a
windfall for investment banks given a solid earnings season in
January and February following last year’s record volumes.
In Europe, 2021 was the busiest year in terms of capital
markets activity since 2014, with more than $257 billion raised
from about 1,300 deals, including IPOs, share sales, rights
issues and equity-linked bonds.
Equity capital markets are a relevant source of revenues for
global investment banks. In 2021, according to a report from
Keefe, Bruyete & Woods, equity capital markets contributed
between 3 and 8% to the revenues of the main U.S. banks.
But inflation risks, already a concern for investors, were
compounded by Russia’s invasion of Ukraine in late February,
driving the Euro Stoxx 50 volatility index close to 50,
the highest level since February 2020, alarming investors.
Dealmakers typically advise against listing a company if the
volatility index is trading above 25 points. Now it trades at 28
points, a similar level to December 2021.
In the first three months of 2022, just one European company
ranked in the top 20 global ECM offerings: Var Energi AS’s
IPO in Norway, which raised $865 million.

BETTING ON A FIRM PIPELINE
Over the last two weeks secondary markets have started to
recover as volatility is subsiding and major European indices
are returning to pre-war levels.
This has opened a window of opportunity for some of Europe’s
biggest companies.
This week shareholders at Barclays and Glencore
launched accelerated bookbuildings worth more than $1
billion while Italian yacht manufacturer Ferretti braved the
markets raising $243 million in its upcoming Hong Kong listing.

In another sign of equity capital markets activity picking
up, Amsterdam-listed BE Semiconductor Industries launched a 175
million euro convertible bond while French utility EDF will soon
unveil the outcome of a rights issue set to raise 3.2 billion
euros ($3.57 billion).
“As the last week and a half has shown, once there is a
window of some market stability, there tends to be a rapid surge
in activity and performance across the ECM market – and in this
case it’s across all products, and all geographies,” said Aloke
Gupte, JP Morgan Co-Head for Equity Capital Markets in EMEA.
Investment banks are betting on a recovery in the coming
months if geopolitical tensions stabilise, as a number of
companies are waiting for a better market environment to tap
deep-pocketed investors eager to allocate capital.
“I think if we see some resolution to the conflict in
Ukraine, the IPO market will reopen very quickly,” said
Koemtzopoulos.
European giants like luxury sportscar maker Porsche, chip
designer ARM and Galderma are already working with advisors on
multi-billion dollar offerings.

In Spain, which ranked as one of Europe’s most active
markets last year, companies including warehouse specialist
Mecalux have revamped their listing plans and will attempt to
list in Madrid before the summer.
($1=0.8967 euros)

(Additional reporting by Lucy Raitano, editing by Chizu
Nomiyama)
((andres.gonzalez@thomsonreuters.com; 0034 647 69 49 89;
Reuters Messaging:
andres.gonzalez.thomsonreuters.com@reuters.net))