The charts don't show it, but the stock market is having a bit of an existential crisis. The low valuations of some companies, the high requirements for information, the uncertainty after the latest banking turmoil and the financing alternatives offered by liquidity-filled venture capital giants have reduced the interest of companies to list on the stock market. What used to be aspirational for any company seems to have momentarily become an uncomfortable and dangerous place. This year there is no advanced project to jump to the parquet, but the forecast is that in 2024 the stock market bells will ring again. While companies look out on the shore afraid to jump, the Ibex accumulates a revaluation of more than 9% so far this year.
"The problem is that investors are now not willing to pay particularly high multiples," especially after realizing that "most of the recent IPOs have not performed perfectly," says Salvatore Branca, head of Equity Capital Markets at BNP Paribas for southern Europe. Added to this are “several episodes of volatility such as the one related to Credit Suisse, together with a scenario of rate and price rises”. He says it by videoconference from London, in a week in which the latest debt and inflation data in the United Kingdom have caused "a certain fear in the markets."
Last year, only one company was listed on the Spanish stock market, Opdenergy, and so far in 2023 none have done so. Much longer is the list of projects put in the freezer since the markets turned upside down in February 2022 with the Russian invasion of Ukraine: Primafrio, Mecalux, Repsol's renewables and, more recently, Cosentino. The current episode should be temporary, since, according to Branca, "there is still a lot of liquidity and a significant portfolio of IPO projects." Of course, they will not materialize until 2024 because, even contracting banks now, it takes between five and seven months for their execution.
Javier Fernández-Galiano, director of Financial Advisory at Deloitte, cites "the complex geopolitical context, the high levels of inflation in the world and the response of central banks with their aggressive interest rate hikes" as the factors that have paralyzed the plans of many companies. His forecast is that in the coming months there will be "a certain reactivation of the market", among other things because the stock markets are now behaving better and "they have learned to live with all the uncertainties". “There are companies that are preparing to go public,” he says.
Sources from an international business bank with a presence in Spain confirm that, although crouching, there are IPO projects in the offing. The market is very attentive to what may happen with Cirsa, OkMobility and, in the longer term, Tendam and Idealista. They are the companies that would put an end to the paralysis and would do so in sectors far from energy, which has been the one that has led the last exits. The firm specializing in White transactions
Meanwhile, the trend towards stock exclusions has continued. Since 2020, Siemens Gamesa, Biosearch, Euskaltel, Barón de Ley, Solarpack and Zardoya Otis have said goodbye to the Spanish parquet. And NH could soon do so if Minor continues to buy shares above 94%. Sources from the National Securities Market Commission (CNMV) point out that the novelty is not so much these exclusions as the drought of premieres, and that is why the supervisor is working on measures that facilitate the leap to companies.
The president of the CNMV himself, Rodrigo Buenaventura, has openly defended the need to reduce the high information requirements for companies that want to start trading and has pointed to venture capital funds as the figure that competes with the stock market. . Last year, these investment firms once again broke a new record, devoting 8,735 million euros to buying shares in companies in Spain, according to data from Spain Cap.
Companies have preferred in many cases "to opt for other financing alternatives such as private equity, the issuance of bonds or bank financing," says Fernández-Galiano from Deloitte.
The investment bank is not interested in the music stopping playing, and those in charge of directing the orchestra defend the potential of the stock market against venture capital funds. In a report published this week, Blackrock, which is one of the main investors in Ibex companies, considers that the variable income market is preferable to venture capital. "We hope that the risks will dissipate in the medium term," he says.
Meanwhile, some listed Spanish companies do not hide their frustration at the low valuation on the stock market. Banks complain that their shares have fallen below book value and one of the Ibex's main industrial groups, Acerinox, claims that their real value is almost double the listed price. The ITV leader, Applus, also listed, has agreed to provide information to various international funds willing to launch a takeover bid for the company, which is trading well below its reasonable multiples.
To define the current environment, José Manuel Corrales, professor of Applied Economics at the European University, draws attention to the "high degree of financial turbulence and the role of the ECB in establishing banking supervision mechanisms", which will continue to cause From his point of view, uncertainty in the markets over the next few months in Europe and the United States.
The drought of IPOs also occurs at a European and global level. According to Marketwatch, in the first quarter there were 284 IPOs for just 25,000 million dollars, a volume lower than that of the worst quarter of the pandemic. Geopolitical doubts, interest rate hikes and “unexpected turmoil” contributed to “dampening appetite for IPOs in the first quarter,” PwC says in its latest IPO Watch Europe report.
The counterpoint to the companies' fear of jumping into the pool is the temperature of the water. The Ibex is still 8.4% below pre-pandemic levels, but has risen so far this year and seems to have recovered from the ravages of the recent banking crisis.
