A rally in European equities has brought cheer to investors and banks are urging sponsors to sell listed positions before sentiment could turn again. Private equity (PE) and asset management giant Apollo Global Management reopened the European blocks market last week and other PEs could follow.

European equities remain a strong market to sell into: the Stoxx 600 is up 5.36% in the year to date (YTD), having recovered most of its losses from US President Donald Trump’s ‘Liberation Day’ tariff announcement on 2 April.

Volatility prematurely shut the blocks market towards the end of March; and then quarterly earnings, and the corporate blackouts associated with them, then prevented issuers from launching equity sell-downs.

Last Thursday, though, Apollo took advantage of stronger market conditions and sold a stake worth EUR 496.9m in Italian-listed gaming company Lottomatica, selling 10.33% of the company at a 4.5% discount to close.

This represented a tight -0.44x the percentage stage sold, as tracked by Dealogic’s Price of Liquidity (PoL) metric, one of the tightest European blocks since the introduction of universal tariffs on US imports.

Source: Dealogic

Not all companies are likely to get such favourable pricing.

The Italian company has performed well since Trump’s tariffs announcement. It reported a 33% year-on-year (YoY) increase in revenues in its 1Q results on 7 May alongside a share buyback worth EUR 500m.

Analysts on the stock are also bullish. For example, JPMorgan has an “overweight” rating and a price target of EUR 28 a share. This represents upside of 46.6% even from the tight block price.

Other sponsors have had to take slightly wider pricing, such as Cinven, MidEuropa and Permira when they place 40 million shares in Polish e-retailer Allegro on 16 April in an overnight deal worth PLN 1.2bn (USD 308.9m).

The deal was priced at a 7.2% discount to the last close of PLN 31.51, representing a PoL ratio of -1.9x to the 3.78% stake sold; a wider pricing ratio than when the private equity backers sold in April 2024 at a PoL ratio of -1.1x.

However, building pressure on sponsors to return capital to limited partners (LPs) is still increasing pressure on PE firms to do quick sell-downs of their listed assets, as ECM Pulse has written before.

“The mentality of the sponsors on deals like Allegro is something that we hope to see replicated now as the market reopens, it’s a mostly sponsor pipe for many of us,” said an ECM banker.

Don’t miss your chance

Despite the market rally in Europe and indeed, benchmark US indices, several market participants speaking to ECM Pulse warned that they see the potential for the market to fall again. This is due to pressures on the global economy, as well as ongoing trade tensions.

Indeed, shorting of exchange-traded funds (ETFs) in the US by hedge funds hit a record high in April, according to data from Goldman Sachs. At the same time, retail investors bought into the US ETF market at the highest levels on record.

“Although generally the market has stabilised now, there is still an argument to be made around the recovery is overdone and has overlooked structural economic weakness triggered by consumer results as well as new data which will only become apparent when tariffs sink in,” said a second ECM banker.

Both ECM bankers, plus two others speaking to ECM Pulse, said that they expected a resumption of European block activity quickly, starting this week, to follow-on from Apollo’s deal in Lottomatica last week and the Allegro sell-down in April.

Even in calmer markets, there will be some nerves around executing trades, given the violence of market reactions to US policy already this year and how quickly things can turn under the Trump administration.

Blocks stopped prematurely before the blackouts due to earnings, and there are still some nerves, the first banker said. “We have had some clients asking what the absolute shortest time is you can do a wall-cross before going, say three to four hours before launch.”

In order to get the best long-only investors in the book, it is important to take time, this banker said. “There are a lot of uncertainties now, especially as we are dealing with one-man volatility. People are trying to ignore Trump, but in our world, I am not sure we can.”

Another challenge might be persuading many to take what is a clear window and not waiting for pricing perfection, and riding underlying stocks higher as markets continue to recover.

“The pipe of secondary blocks is a little frustrating because of the nervousness and some sellers [are] now waiting for a better price,” said the same banker. “In some of these cases, if you wait too long you are going to miss the window.

“You are going to see people missing the window, the great frustration for us is clients looking for pricing perfection and missing the chance to go, I can’t tell you how many conversations we have with sponsors and other clients bemoaning all the times they should have done a trade and that will happen again. Sometimes you just have to do the best you can.”

There is a clear appetite among buysiders to get back into the game, particularly in Europe. How long that lasts for, though, is anyone’s guess.