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Capital Markets

IPOs: Poor performance dogs European IPOs

Pilot-fishing no longer works; More bookrunners hamper consensus

The successful $10 billion flotation of Swiss commodities trading firm Glencore on May 19 pushed issuance for the year to $17.7 billion and was a much-needed shot in the arm for the European IPO market. But after a string of postponements and poorly performing deals ECM bankers are wary of interpreting the success of the deal more widely as a revival of investors’ appetite for new issues.

"Glencore was a deal which was always likely to get done – it’s a must-own asset and the range they set was viewed as attractive by the market," says Ed Sankey, global co-head of equity syndicate at Deutsche Bank. "Investors prefer large liquid deals in a market where secondary trading volumes have been relatively thin and with uncertainty around the likes of sovereign risk and unrest in the Middle East."

Mixed fortunes

The mixed fortunes of a number of IPOs this year have shed a harsh light on the process by which these flotations take place. In some cases, most notably the DKr13.3 billion ($2.5 billion) IPO of private-equity-backed cleaning services firm ISS, bad luck was clearly to blame. The company began its bookbuilding process on March 8, three days before Japan’s devastating earthquake and ensuing nuclear crisis.

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