European IPOs might be facing a drought, but equity selldowns are still keeping rainmakers in the equity capital markets busy.

Investors might be reluctant to back newly listed companies in volatile markets, but they are much more comfortable offering sponsors and other shareholders a chance to monetise stock holdings, even in the worst of markets.

Buyers are happy to put money to work in large-cap, already listed, names, and shareholders are happy to provide paper given higher European share prices since the start of the year.

Large blocks have continued to be priced despite increasing equity turbulence since 11 March, when US equity markets had their worst trading day of the year.

But alongside this retrenchment in US equities, March has been a good month for European equity sales by sponsors alongside, corporate, and individual, shareholders monetising their stakes through accelerated bookbuilds (ABBs).

In the last fortnight, sell-downs in Haleon by Pfizer, Galderma by EQT, Bureau Veritas by Wendel, Universal Music Group by Pershing Square, the investment vehicle of Bill Ackman, and a USD EUR 99.98m trade in Exosens by European investment group HLD, have added billions in issuance volume to what was already a good year so far for European ABB (block) trades.

Largest secondary block trades since 11 March

Source: Dealogic, trading data as of close March 20.

“I think this trend of increased European block volumes is going to continue,” said an ECM banker. “Despite all the volatility we have seen everything is getting done.”

A longer-term trend

Since 19 February, the most recent high for both the S&P 500 and NASDAQ Composite benchmarks were down 7.63% and 7.48% respectively at close on 20 March. Both entered a technical correction in the week of 11 March, falling 10% below a recent index high.

Given the market caps of both indices on 19 February, that represents a cumulative loss of around USD 5.7tr in just over a month, according to calculations by ECM Pulse. The Stoxx 600 was flat over the same period.

The market declines have led to a sharp reversal in global equity allocations from fund managers.

According to Bank of America’s Global Fund Manager Survey for March, Eurozone and UK Equites had the largest monthly allocation growth among fund managers surveyed. The flow from US equities was the largest monthly allocation away from any asset class and the biggest drop in US equity allocation on record.

The survey also revealed that 69% of fund managers felt US exceptionalism had ‘peaked’.

This bodes well for European ABBs, given the need for fund managers to put money to work, but has not followed through to the IPO market.

Source: Dealogic

Last week’s ECM Pulse noted that several IPO issuers are looking at pausing listing processes until after Easter, and there are signs that much of Europe’s calendar is now targeted for the second half of 2025.

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Two of Europe’s near-term IPOs, Spanish gaming company Cirsa and German pharmaceutical firm Stada, have now been pushed back, as reported, and German bank OLB, a popular listing candidate, is to be sold to a strategic investor, with an announcement just hours before a scheduled IPO launch.

IPOs in Europe typically take around four weeks of marketing, meaning more exposure to volatility. The illiquidity means investors often having to take positions as longer-term shareholders given low trading volumes in newly-listed businesses.

In contrast, block trades in large, listed, companies give investors a chance to take a sizeable stake in a business, at a discount, but typically have high enough daily trading volume to satisfy the liquidity needs of most large investors.

Two other ECM bankers noted that there is now even a liquidity premium in the blocks market, with trades in large-cap names being executed fairly easily, but banks are having a trickier time with mid-cap names.

An exception to the rule is when a sector is particularly hot, like in the case of Exosens, which makes optimal imaging equipment for several industries, but notably defence companies, playing into recent demand for European defence equities.

Caution pays

The prevailing takeaway from the last two weeks is that even with difficult market conditions European equity sell-downs continue to be digested by the market, even if it can take a few days of trading for stock prices to recover from pre-sell-down prices afterwards, particularly in large trades that are not well flagged.

Pricing has widened somewhat, according to Dealogic’s proprietary Price of Liquidity metrics which analyses blocks pricing by comparing discounts with percentage stakes sold, particularly after 11 March.

“I think it is encouraging, what I can’t bear is people saying can’t get anything done, the IPO market is what it is, and we all know that we have to be more cautious in volatile markets,” said the first banker. “Blocks are going well at the moment though and at the moment it really is the only chance that most ECM investors have to take part in the market, given the state of the IPO market.”

But even if investors are willing to take part in large sell-downs in names that are not widely expected by the market, they still need some warming up through a pre-deal market sounding exercise (wall-cross).

“Investors need a wall-cross,” said the same banker. “We know that now from what has worked and from the deals out there that didn’t have one. It is the only way to get in the big high quality long-onlies, in this market nobody likes surprises.”