In Aesop’s fable of the goose that laid the golden egg, it is greed that kills it, as the owners murder the animal in the hope of greater riches. In the case of the IPO of Permira-owned Italian luxury shoemaker Golden Goose, however, sources claim that French political chaos, rather than price, was the lethal factor.

The decision to pull the Golden Goose IPO after the company set an offer price was a genuine shock to Europe’s equity capital markets. But sources close to the deal said it was deemed the only course of action possible for a seller desperate for the deal to trade well.

The cancellation of the listing means that Europe’s pre-summer IPO window looks increasingly thin, notwithstanding a great first half of the year.

Source: Dealogic

Macron’s Moncler Massacre

Golden Goose’s IPO was a delicate balancing act. To be attractive, for many investors, the deal had to be seen as coming at a large discount to its main marketed peer, Italian luxury jacket maker Moncler [BIT:MONC]. Investors could buy Golden Goose at the IPO discount and hope that a similar single-product luxury equity story would propel it to Moncler-like multiples over time.

When the price range was unveiled on 11 June, Golden Goose would have traded at around 8.8x 2024 EBITDA at the bottom of the range and at about 9.7x at the top, based off a forward earnings analysis by this news service.

The offer price of EUR 9.75 a share, just off the bottom, translated to a forward looking multiple of around 9.1x forward looking EBITDA.

At the announcement of the range, Moncler traded at around 12.3x 2024 EV/EBITDA, according to data from Fidessa and provided by Factset. It had been around 13.5x in late May, just before Golden Goose published an intention to float (ITF).

Moncler has seen its shares fall in line with other luxury stocks over the last few months. This has been exacerbated by French President Emmanuel Macron’s decision to call snap parliamentary elections in reaction to a surge in the support for Marine Le Pen’s Rassemblement National party in European parliamentary elections earlier this month.

Between the announcement of the Golden Goose price range, and the day books closed, Moncler had fallen by 3.9%. Since the publication of Golden Goose’s ITF on 30 May, Moncler had fallen by almost 8%.

As of last Tuesday, the day Golden Goose’s IPO books closed, Moncler’s forward-looking multiple had fallen to 11.7x 2024 earnings. By Friday 21 June, the day Golden Goose was meant to start trading, that was down to 11.6x.

The offer price represented an enterprise discount to Moncler of above 30% at ITF, around a 26% discount on the day of the price range and below 22% the day of pricing when the IPO was pulled. An investor previously told this news service they had wanted an EV discount of around 30% or above 25% at a minimum.

Aftermarket focus

Permira needed the goose to fly in the aftermarket, with one source close to the deal noting that strong aftermarket performance was the main priority for the sponsor, especially after seeing the value of other portfolio companies like TeamViewer [ETR:TMV], Allegro [WSE:ALE] and Dr Martens [LON:DOCS] disintegrate in trading.

Several sources away from the deal noted that there was plenty of discussion in the market over whether there were enough quality long-onlies in the book, and that several of the big long-only European ECM investors were believed to be absent.

An ECM banker away from the deal added that, given the wider market, investors he spoke to were wondering why Permira hadn’t settled on an even larger discount to give the deal more of a chance. He noted that the margin for error was too thin at the price Permira chose to go ahead with.

However, the source close to the deal and two further sources close noted that the book was easily strong enough for the deal to get done, with one noting it was equity market volatility that meant that an immediate aftermarket gain could not be guaranteed. “We were in a position with several good long-onlies and to be able to scale them back in a way that you would want to in any large IPO,” another of the sources said.

The first source added that over ten days the Golden Goose IPO had gone from a position where the seller and syndicate could do a deal with a good book, at a price they thought worked for the market, to one where peer performance meant they could not be sure of trading up because of election-related volatility.

Contagion risk

France’s parliamentary elections is the sort of shock that equity investors dread.

“Markets hate being taken aback, the dissolution was not understood by politicians or citizens and therefore not by the markets,” said one French ECM lawyer.

“The president did not consult much and did not measure the potential chaos it could unleash if an antibusiness nationalist breaks his seven-year probusiness agenda which put France at the top of foreign investment destinations in Europe,” he added.

A French ECM banker was concerned about wider contagion across Europe given the surge in Eurosceptic politics in France.

Shortly after Golden Goose’s postponement, Spain-based Tendam, which is backed by CVC and PAI  was also reported to be postponing an IPO launch until at least after the summer.

One of the ECM bankers away from the Golden Goose IPO noted that the market remained far from closed, despite its wings being temporarily clipped.

Even though the surprise of the elections could temporarily halt ECM activity in France, and possibly across Europe, there are reasons to remain cautiously optimistic.

Lower inflation and a first ECB rate cut have already been preceded by a surge of M&A early look meetings this semester, several French dealmakers pointed out.

For instance, French corporates that posted solid financial results earlier this year, are keen on M&A and many need equity capital hikes to fund their growth strategy outside of France and Europe, two ECM bankers said.

Furthermore, healthcare giant Sanofi [EPA:SAN; NASDAQ:SNY] kicked off a dual-track process for its consumer healthcare division valued around EUR 20bn+, as reported, just days after the French president’s call for surprise elections,

The election could lead to a hung parliament and a moderate parliamentary coalition in France, in which case the volatility will prove short lived.

But, should the result lead to a more extreme parliamentary make-up and Macron becomes a lame duck, there may be reason to fear more Golden Gooses before the year is out.

Permira declined to comment on this story.