Europe’s IPO market professionals were popping champagne at the end of last week after Germany’s Schott Pharma [ETR:1SXP] soared in early trading, but they warn other issuers not to expect an easy ride.

Schott Pharma’s stock closed 17% above its IPO price on Friday, a slight improvement on its 15% first day pop.

A mix of European and US long-onlies flocked to the over 200-line book, said three sources close to the deal, with one adding that several long-onlies continued to buy in the aftermarket.

The transaction was helped by greater levels of engagement form large mutual fund complexes that were burned on the IPO class of 2021 and now re-engaging in the market, said one of the sources. A small group of these global asset management giants have long been the bedrock of Europe’s IPO market and bankers have, throughout 2023, cited their lack of engagement with IPOs as a reason for the market’s troubles.

“We needed a moment like this,” the source said. “I would say that there is still more downside risk to launching an IPO than there is upside risk to not launching one, but this was a marker.”

An ECM banker said that the fact Schott traded up was a positive, but that the deal needed to continue to trade up over the long-term for it to have a meaningful legacy.

According to four ECM investors, Schott’s success was down to it being a rare opportunity to buy into the German Pharma’s high quality, high margin, glass vials business.

“To own this before you had to own a US-listed stock in Stevanato [NYSE:STVN] or a less specialised peer in Gerreshiemer [ETR:GXI],” said one of the investors. Two of the investors, who sit at large global asset managers, confirmed their firms were re-engaging with IPOs but only on the highest quality names.

One noted that he expected his firm’s interest in new issues to fall away as soon as the quality bar on deals drops.

CVC listing would end 2023 on a high

One name now looms large, private equity giant CVC Capital Partners, which all four investors say they expect to happen before the end of the year.

There had been some speculation about an IPO launch this year, but the investors say they feel there is momentum building behind a listing.

One of the investors said he was meeting with the company this week in a final round of IPO meetings with a launch likely this month, for pricing in November.

Another of the investors said that CVC would have to move quickly to price an IPO before the 2023 window shuts, traditionally around the US thanksgiving holiday.

The PE firm is a huge potential name in the European IPO market, he noted, but some investors had a less than rosy view on private equity IPOs following the listing of Bridgepoint [LON:BPT] in 2021 and the US IPO of TPG [NASDAQ:TPG] which sit 45% down and only 2.1% above their respective IPO prices. Sweden’s EQT [STO:EQT] has fared better, trading over 200% above IPO price.

Others were less concerned.

“CVC is going to be oversubscribed and I suspect several investors are already pre-positioned to take a big chunk of the IPO,” said another of the investors. “It should be definitely happening this year.”

CVC did not respond to request for comment on IPO plans.

Two live deals to go

While waiting for CVC, two other IPOs are now live – German defence contractor and gearbox manufacturer Renk, alongside French software company Planisware.

Renk is covered on its full deal size, although not throughout its initial range as Schott was early in its bookbuild. Planisware revealed its IPO price range today valuing the company between EUR 1.11bn and EUR 1.25bn with a cornerstone investment from CDC Tech Premium a division of Caisse des Dépôts designed to support France’s tech unicorns.

Three investors said they were less enthused by Renk and Planisware than they were on Schott Pharma, which they saw as the highest quality of the three.

A fourth said he liked Renk, which he felt was offering a substantial discount to peers, with an IPO market cap of between EUR 1.5bn and EUR 1.8bn, but did not find Planisware’s valuation enticing.

The investors pointed to a debate over whether Planisware or Renk were ‘must-own’ assets, in the vein of Porsche listing last year, or even Schott Pharma, given its specialty exposure to its sector.

“Valuations still have to be compelling,” said the ECM banker. “Issuers are price takers at the moment, and to some extent they always are but that is more the case at the moment.”

With Renk scheduled to wrap its IPO this week and Planisware scheduled to close books on October 11, ECM Pulse is waiting in anticipation to see if Europe can maintain its winning streak.

Renk’s majority shareholder and sponsor Triton declined to comment on this story. Planisware did not respond to requests for comment.