After building momentum for several years, Europe’s once burgeoning tech IPO pool is looking remarkably shallow.
Ask anyone in the London market for the most promising tech IPO in the works and you’re likely to hear one name: Revolut. The high-profile unicorn is more conservative when asked about its path to public markets.
In response to this news service last week, when the UK fintech released its latest annual report, a spokesperson said the company is not looking to revive the listing plans anytime soon. The focus is on more prosaic efforts such as strengthening governance, profitability, launching new products and providing better service to customers.
The theme is common among European tech hopefuls and a far cry from market conditions in 2021 when a huge USD 25.5bn was printed by tech companies in Europe’s IPO market over 170 deals, according to Dealogic data.
The record had been building up slowly in the previous years, with USD 10bn deal value reached in 2020.
But that momentum stalled in 2022, when only 43 deals were priced for a measly USD 1.76bn.
Investors are more sceptical about tech prospects after some high-profile IPO losses, particularly from listings in 2021.
The sector has also suffered in the wake of a rotation away from high-growth but low-profit technology firms on the back of rising global interest rates, causing a reset in valuations for the tech giants that IPO hopefuls aspire to be compared with.
Slowing growth and big layoffs at giants like Alphabet [NASDAQ:GOOGL], Google’s parent company, Meta Platforms [NASDAQ:META] and Amazon [NASDAQ:AMZN] have smashed confidence across ECM in tech listings.
In a note announcing redundancies, the CEO of European property technology company and IPO hopeful Casavo said: Equity capital markets for high-growth tech companies are in a “reset” phase: valuations have dramatically dropped, and investors are extremely cautious when it comes to deploying capital in this asset class.
“As a consequence, it would be irresponsible to rely on additional external funding in the near term," he added, noting that his firm’s priority would be reaching financial self-sustainability as soon as possible.
Companies like Starling Bank, Zopa, OakNorth and Trustly have made no secret of IPO ambitions, but their public statements exude a patient attitude as they prioritise funding rounds over pitching to reluctant ECM investors.
An ECM banker suggested that “tech” is a dangerous word in IPO early looks; a better way of selling equity stories is layering any software or hardware business with the sector it targets.
“Renewables sounds better than tech to the ears of an investor,” an ECM banker noted. ‘Fintech’ is still enough to scare some buysiders away, he added.
One investor said meetings with tech IPO candidates won't push him “out of bed”, while once upon a time he would have been leaping from the mattress for a meeting with the next big thing in European tech.
What a difference a year makes.
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