A small single-digit pop for Zurich-listed SMG Swiss Marketplace Group following its stock market debut should guide sponsor Hellman & Friedman (H&F) to give a greater discount on the Swedish IPO of Verisure.

The stock is trading up, far from a disaster, and the fact that Europe now has one USD 1bn-plus IPO priced, plus a USD 3bn listing in the market in the form of Verisure, is clearly a positive start to the window.

“SMG shows that large-cap IPOs are back,” said an ECM banker. “Sponsors and corporates now see the market as a legitimate exit route again, a sharp shift from the caution of the past year.”

A listing for the security systems business was launched last week, 17 September, and is expected to be priced at the beginning of next month. The deal is going to be large, with a primary raise of around EUR 3.1bn, making it by far the largest European IPO of 2025.

The significant primary raise will be used to de-lever the company to 3.0x EBITDA at IPO, strengthen its balance sheet by refinancing certain outstanding debt, and fund the acquisition of ADT Mexico.

Source: Dealogic

But SMG’s start has nonetheless been lacklustre – and is not likely a model that H&F wants to replicate for Verisure.

The sheer size of the capital raise in the IPO means any secondary share sale will be limited, with majority owner H&F left with a substantial stake in the business to monetise through future block trades.

There isn’t anything wrong with that model, as fellow-sponsor EQT has shown in its disposals of Swiss-skincare company Galderma, but there does need to be a bit of give on valuation at IPO for the deal structure to work primarily for the sponsor.

For H&F to best monetise Verisure, it likely needs the stock to trade up more than SMG has done so far.

SMG finished its first day of trading at CHF 49 a share, 6.52% above its CHF 46 IPO price, the top of its marketed range. Today (22 September), its second day of trading, it has fallen to CHF 47.02, mid-afternoon in Zurich.

The muted nature of this aftermarket trading represents the fact that SMG’s sellers targeted an IPO price offering scant discount to its listed peers, as this news service reported.

“There was nothing inherently wrong with SMG’s price,” an investor told ECM Pulse. “But the sellers left no value on the table to give a buffer in the aftermarket.”

With follow-ons in mind, EQT’s pricing of Galderma primed the stock for a 20.7% first day pop, with its valuation widely seen as generous to its closest listed peers at the time.

Aftermarket wiggle room

IPOs often see a little early selling once the deal is priced.

There are the pure momentum trades, where investors cash-out quickly to bank any alpha from a rise in shares at open. There are also investors who might have secured less allocation than they had hoped for and thus decide to switch from a longer-term holding to immediate monetisation. The presence of two large cornerstones in SMG’s book reduced the number of shares allocable to other investors.

This is part and parcel of all IPOs and if there is a big enough discount to peers at pricing, it gives incentive for other investors in the book to buy more, negating any early selling. But if the price is not generous enough there is less attraction for buyers to outweigh sellers.

Sources told this news service last week that Verisure could target an enterprise value of either side of EUR 20bn at IPO.

But a sweet spot for many on the buyside would be a market capitalisation of around EUR 13bn-EUR 14bn, the investor argued. Verisure intends to have debt of around 3x its EBITDA at IPO.

If Verisure reports FY25 EBITDA of around EUR 1.7bn, assuming it continues the same 10.5% growth it showed in the first half, net debt could be sustained at around EUR 5bn at IPO while achieving the target ratio.

This would roughly mean an enterprise value of between EUR 18bn-EUR 19bn at IPO price, in line with the under EUR 20bn enterprise value sources were pointing to last week. Opting to price at EUR 20bn or over it could see H&F push the price too much.

“A EUR 15bn market cap probably works with Verisure, but again it wouldn’t be leaving much on the table,” the investor added. “Hopefully H&F will take note of what has happened on SMG and structures Verisure accordingly.”

“It is going to have a lot to sell afterwards so Verisure needs to trade up.”

But as long as SMG stays above water, and H&F adopts the EQT playbook for its Verisure IPO pricing, ECM professionals can perhaps dream of some form of European listings renaissance.