One day after German retailer Douglas bankers’ poorly greeted listing, anxieties are beginning to settle around Europe’s initial public offering (IPO) market thanks to the impressive debut of Swiss skincare business Galderma on Friday.

After Porsche in September 2022, Galderma’s IPO was the largest in Europe. It made its debut on the Zurich stock exchange.

As European corporations worth billions of dollars prepare to go public, the much-awaited listing finally happens.

The more than 12% decline in Douglas’s stock put such hopes in jeopardy. Douglas is controlled by CVC.

Nevertheless, in the first hours of trading, Galderma’s shares surged over its issue price, while Reddit, a social media firm based in New York, saw a more than 48% increase in its stock price overnight.

“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.

Following a second year of worldwide IPO issues falling in 2023, bankers and investors were intently monitoring the pricing of these two private equity-owned enterprises.

Pressure has increased on buyout funds to sell companies, repay investors’ money, and use recently raised funds as M&A transactions have fallen to decade-low levels.

According to analysts at Bain & Co., private equity companies are left holding an astounding $3.2 trillion in unsold assets, which limits the return of capital to investors and has a chilling effect on fundraising.

For the second straight day, Wall Street’s three main stock indexes closed at all-time highs on Thursday, after the Federal Reserve’s reassurance to investors over the likelihood of rate decreases this year.

However, the stock market is emerging as a feasible exit strategy as central banks hint that interest rate hikes will stop.

Big private equity-backed deals are an indication that IPO markets are open to new ideas, according to Markus Meier, Bank of America’s director of ECM in Germany.

This year, Europe has already witnessed a few success stories.

Since making its debut in February, the first entrant to the Frankfurt Stock Exchange this year, Renk, a maker of tank armour, has nearly doubled its issue price of 15 euros. Due to geopolitical unrest and uncertainty surrounding interest rates, several initial public offerings (IPOs) were delayed last autumn.

Douglas and Galderma both hastened their IPOs to capitalise on the upbeat atmosphere following Renk’s debut.

To pay off debt, Douglas, owned by CVC, raised 850 million euros ($920 million). The price of the shares was 26 euros, which was the lowest in the given price range. They were traded as low as 22.7 euros.

With its shares debuting at 61 francs on the SIX Swiss Exchange, EQT-backed Galderma raised over 2 billion Swiss francs ($2.23 billion), up 15% from the IPO’s final price of 53 francs per share, which was the upper end of its specified price range.

Undoubtedly, Douglas will undoubtedly leave a bad taste in the mouths of those investors who lost money, and he might also be a hindrance to some IPO hopefuls.

“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.

While caution is still advised, more new problems should be anticipated, according to Julian Schulze De la Cruz, a capital markets attorney at Noerr.

As early as the second quarter, Italian luxury company Golden Goose, which is well-known for its worn-out trainers, is expected to go public through an IPO led by private equity firm Permira. OLB Bank, a lender sponsored by Apollo, has also announced that it is getting ready to go public.

After Douglas, another company in CVC’s portfolio, fuel card provider DKV Mobility is also waiting to return after delaying its IPO ambitions the previous year.

According to a person familiar with the strategy, CVC itself is anticipated to enter the market as soon as after Easter with an IPO valued at more than one billion euros.

(Adapted from MarketScreener.com)

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