European IPO market roars back to life

European stock market listings have come back with a bang after the summer lull but blank cheque firms are nowhere to be seen.

So far this quarter, 42 initial public offerings (IPOs) in Europe have raised $8.5 billion, the highest amount for a decade, but there hasn’t been special purpose acquisition company (SPAC) deal since July, according to Refinitiv data.

The SPAC frenzy in the United States during 2020 and the first half of 2021 was widely tipped to spill over to Europe but despite a flurry of activity before the holiday season, the market appears to have fizzled out.

“The SPAC IPO market is almost dead,” said German entrepreneur Christoph Gerlinger, who considered setting up a SPAC but has shelved those plans to focus on his job as a private equity manager investing in technology firms.

A SPAC is a blank cheque firm that raises funds in an IPO with the aim of merging with a private company.

Once that happens, the target becomes a listed stock, sidestepping the traditional IPO route which is heavily regulated.

SPACs became one of Wall Street’s hottest investment trends last year as many retail investors stuck at home during COVID-19 lockdowns placed speculative bets on them.

In Europe so far this year, SPAC issuance peaked in the second quarter with 15 deals raising $3.7 billion, followed by seven more in July worth $1.4 billion, but there have not been any since, the Refinitiv data showed.

Overall, 26 SPACs have listed in Europe this year, raising $6.6 billion. Over the same period in the United States, 433 new SPACs have raised $118 billion.

The last time there were more European IPOs in a third quarter was in 2007 with 99 deals and the amount raised was the highest since 2011, when IPO proceeds came in at $9 billion, according to the Refinitiv data as of Sept. 24.

SPACs offer companies such as technology firms with high growth potential but little near-term visibility on revenue and profit an avenue to raise funds in a less onerous way than a full-blown IPO.

They also offer profit opportunities for SPAC sponsors - usually well-known entrepreneurs - as well as investors, who get the chance to buy into private companies via the stock market rather than less liquid venture capital funds.

But SPAC sponsors and bankers say demand has dried up in the face of poor performance, a regulatory crackdown reut.rs/3m6ezlU in the United States, and waning market sentiment.