Total European IPO issuance fell by more than a third in 2023, but there is cautious optimism for the year ahead. However, the IPO window is expected to be tight

• Improving macroeconomic sentiment, equity indices growth and lower volatility, as well as growing demand for exits, provide optimism for IPOs in 2024. However, this renewed optimism is tempered by remaining geopolitical uncertainties and upcoming elections, meaning IPO Windows may open quickly and close.

European market for initial public offerings and subsequent share issues

Revenue from European IPOs in 2023 fell by more than a third (35%) compared to the previous year, with global macroeconomic and geopolitical uncertainty contributing to a weak market, according to PwC's latest IPO Watch.

In 2023, there were 107 IPOs across Europe, raising €10.2 billion, a decrease of €5.4 billion compared to the previous year, which raised €15.6 billion from 102 IPOs. In the last quarter, 1.7 billion euros were raised through 28 IPOs across Europe. The largest listings include the €1.9 billion IPO of Romanian power producer Hidroelectrica, the €935 million IPO of German medical packaging company SCHOTT Pharma and the IPO of German green hydrogen solutions provider Thyssenkrupp Nucera of 605 million euros. Admiral Acquisition's €507 million IPO of Special Purpose Acquisition Company (SPAC) on the London Stock Exchange was among the five largest IPOs in Europe in 2023.

The London Stock Exchange was the leading stock exchange for follow-on issues in Europe in 2023, contributing 25% of the total proceeds.

Stronger than expected equity markets and lower volatility have created a supportive environment for follow-on equity issuances, which proved resilient in 2023, with proceeds increasing by €6.4 billion (8.7%).

The UK was the most active secondary issuance market in Europe this year. It raised a total of 20.3 billion euros and contributed 25% of the total proceeds.

Heading into 2024, there is renewed optimism about a possible recovery in the European IPO market, supported by improving macroeconomic sentiment, equity indices growth and lower volatility, as well as growing demand for exits and a healthy issuer pipeline. Given the general market uncertainty, time frames for IPOs are expected to be tight – planning for options and the willingness to take advantage of these narrow windows will be critical for potential issuers.

London in the spotlight

Despite an active follow-on market in London, there were just 11 IPOs in 2023, raising £878 million, as macroeconomic sentiment weighed on new issues. However, according to the latest PwC economic outlook for 2024, the UK economy is expected to recover from the difficult post-pandemic years. And while there are still factors that can change direction, the overall outlook for 2024 is more positive than expected 12 months ago.

In addition, in December 2023, the UK Securities and Exchange Commission (FCA) published its detailed proposals on the effectiveness of primary markets, following extensive consultations up to 2023. The new UK listing regime is scheduled to come into force in the second half of 2024. These changes are intended to make listing in London more attractive and contribute to a more positive outlook for the capital markets.

Global IPO and follow-on offering market

Global IPO activity in 2023 totaled $121 billion from 1,047 IPOs – a 31% decline from the previous year, which raised $173.3 billion from 1,154 IPOs. While 2023 was a quiet year for global IPOs, some regional markets achieved significant growth and continued to perform well, including the Middle East, India and Indonesia.

The largest market for IPOs in 2023 was China at $45.3 billion, followed by the United States ($24 billion) and India ($6.6 billion). The largest sector for IPO activity in terms of proceeds raised was computers and electronics ($34.4 billion), followed by computers and electronics ($34.4 billion). of healthcare ($10.7 billion) and finance ($9.6 billion).

Global follow-on equity issuance in 2023 exceeded the previous year at $381 billion compared to $338 billion in 2022. Strong global stock market performance and lower volatility have enabled established companies to raise significant amounts in 2023 secondary market. The U.S. led the world with subsequent revenues of $34.5 billion in the fourth quarter and $132.7 billion overall for the year. Financials ($58.5 billion), computers and electronics ($55 billion), and healthcare ($53 billion) were the three sectors with the highest subsequent revenues.

Kat Kravstov, capital markets director at PwC UK, said:

“As investor sentiment turned more positive towards the end of 2023 – due to improving macroeconomic developments and easing global recession fears – major equity indices in the US and Europe defied expectations and delivered solid returns. Secondary issuance continues to be strong, but the IPO market has yet to catch up. Looking ahead to 2024, there are positive signs of recovery in the IPO market, supported by demand for new investment opportunities and exits, leading to a growing pipeline of potential issuers. However, IPO windows are expected to be tight and planning for options for IPO candidates will be critical.

“Momentum is also building in the UK and the economy is expected to turn around as inflation normalizes and progress is made in growth and real incomes.” This, coupled with impending changes to the UK listing rules, gives cause for optimism for a reversal of fund flows to support the capital markets.”

Richard Spilsbury, capital markets partner at PwC UK, added:

“Despite the success of additional offerings and volatility that was below historical norms for much of the year, providing good conditions for companies to enter the market, IPOs failed to gain significant traction. The valuation gap remains and private equity sponsors are reluctant to accept lower returns to appease institutional and retail investors who in turn are unwilling to support the valuations seen in the post-Covid situation. However, there is cautious optimism for the year ahead, with several significant IPOs in 2023 now performing well in the aftermarket.”

Ends.