In the first six months of this year, European equity markets saw the fewest initial public stock offerings—just 34—since 2009 during the Great Recession, according to the Financial Times.
Europe’s economy remains burdened by inflation, is teetering on the edge of recession, and the U.S. has become a more attractive place to go public, the FT noted.
The 34 businesses that made their first foray into the stock market raised €2.4 billion, 42 percent less than IPOs did a year earlier and also the least since 2009, the Association for Financial Markets in Europe (AFME) reported.
“Some European companies [are] preferring to list abroad because there’s better liquidity in the U.S.,” Julio Suarez, the AFME’s research director, told the FT. “U.S. capital markets are more attractive to risk capital” while Europe grapples with “a structural lack of competitiveness.”
U.S. IPOs also have slumped but less so, totaling 75 companies raising $11.5 billion in the first half of 2023, data service Dealogic said.
The equity market in the U.K. has become so sluggish that authorities there are implementing reforms that will encourage pension funds to funnel money into companies with strong growth potential.
The move is intended to increase the number of companies listing on the London stock exchange after the rate of listings has slowed in recent months.
Eurozone officials are streamlining the listing process and taking steps that will make investors more aware of small and mid-size firms.
“It’s getting to the point now, both in Europe and the U.K., that people are realizing it’s more urgent than it had been for these jurisdictions to keep up,” Gary Simmons, AFME’s managing director, said to the FT.
TREND FORECAST: With a recession likely in Europe and all but guaranteed in the U.K., equity markets there will remain on life support for the foreseeable future. Barring unexpected events, the U.S. and some emerging markets will offer better returns on stock investments for at least the rest of this year, even if the U.S. enters a mild recession.