European IPOs, and other equity capital markets deals, could be unexpected winners from a long US government shutdown and a swathe of subpar performance from recent US listings.

At various points throughout 2025, equity investors have favoured European stocks over US-listed businesses, a rare occurrence in the last decade.

The reasons behind this have been twofold. First, we’ve seen US investors rotating into under-owned, and often undervalued, European large-cap businesses for portfolio diversity.

Another oft-cited reason is that Europe has provided more regulatory visibility versus an iconoclastic Trump administration with a political and regulatory agenda transforming the role of the United States at home and abroad.

European attractiveness has waned a little in the past few months, as the US IPO market roared ahead, offering greater diversity for investors looking for new stock exposure and investors getting more used to the Trump administration.

What’s more, Europe’s stability premium hangs by a thread.

To paraphrase Oscar Wilde, France losing one government might be regarded as a misfortune. But with Matignon set to welcome its sixth tenant in two years following Sebastien Lecornu’s stunning resignation this morning (6 October), we’re deep into the realms of carelessness.

Andrej Babiš’ victory in the Czech parliamentary elections over the weekend also creates headaches for European Union decision making, as he joins Hungary’s Viktor Orban and Slovakia’s Robert Fico in a pro-Russian front.

Nonetheless, the US has been doing its best to keep pace. European stock popularity returned last week amid a US government shutdown following the budget impasse between Democrats in the Senate and the Trump administration.

Europe’s STOXX 600 jumped 3.7% between 25 September and 3 October, its most significant move for some time.

The main continental European benchmark outperformed both the S&P 500 (up 1.7%) and Nasdaq (up 1.8%) over the same period, indicating a slightly increased flow of capital to European stocks.

Optimism over European capital markets has grown since the market was smashed by US President Donald Trump’s Liberation Day tariff announcement in April; by September, there was sufficient goodwill for IPOs to finally join the European ECM party.

Source: Dealogic 

IPO boost

This column has remarked on the increasing flow of US capital to Europe – and sources say that this momentum has picked up again in the past few weeks.

There are several large European IPO deals that might benefit from increased US investor interest.

The c.EUR 3.6bn Swedish listing of Verisure is set to wrap up tomorrow (7 October) with books multiple times covered on the full deal size across the price range.

Also in the market are German prosthetics tech business Ottobock, set to price its IPO on 7 October; and Princes Group — the UK-based food subsidiary of Italian food conglomerate Newlat — which filed initial UK IPO paperwork on 2 October.

“We are already seeing increased US interest in the transactions we are working on,” said an ECM banker active in the IPO market.

The banker noted that given listed equity market valuations remained high, the equity capital markets remain the main alpha-generating opportunity for several investors. With US politics uncertain, however, due to the shutdown and several recent IPOs, like Klarna, StubHub and Gemini Space Station trading below offer price, Europe has become attractive again at year-end.

“There have been some big US deals, but a lot are fading fast after pricing, Klarna, for example was a big disappointment,” he added. “There are several decent sized European deals in the market and level of indications from US hedge funds, and indications they are giving us is very positive, although it doesn’t all mean they will necessarily get the allocation they want.”

However, a European ECM investor was less enthusiastic about increased demand from US accounts in deals this side of the pond.

“If people can’t or don’t want to deploy capital in the US they are likely to try and do so in Europe instead,” the investor said. “I am not sure that is a good thing, as US capital can often be hot money, like tourists, that we don’t always want in IPOs.”

Take your window

The prevailing narrative among most ECM participants speaking to ECM Pulse this week that the US shutdown was a reminder of the importance of taking an opportunity to IPO when it presents itself.

“I have been giving clients the same advice for many years,” said a second ECM banker. “You should always IPO in the first available window.

“The shutdown is a reminder how uncertain things are at the moment, particularly in the US.”

While political turmoil between Democrats and the White House might boost European ECM this time around, as we’ve seen, Europe is far from insulated from changeable political winds.

With major European economies joining the US in appearing to slow, plus the ever-present threat of transatlantic trade hostilities, clients with an eye on an IPO should be ready to pull the trigger as soon as possible, market participants say.

“Tariffs and recession are both seen as a big risk,” said a senior banker. “We have been talking to several clients who have an IPO as their primary path of exit.

“In that case our advice is they must be ready to go as soon as they can, you never know when this window is going to shut and when it does shut, it can be closed for a long time.”

European ECM is in favour at the moment, but it would be hubristic to assume that the good times will last forever.