Spain’s hopes for IPO revival depend on few key deals

Data Insight ECM Explorer 7 June

Spain’s hopes for IPO revival depend on few key deals

IPO hopefuls in Spain are anxiously waiting for a window to launch transactions, in what could be a great year for Spanish equity capital markets, but there are fears volatility could mean another false dawn.

This news service previously reported that Spanish IPO candidates Ibercaja Banca and renewable energy player Opdenergy both had their eyes on the June/July IPO window, despite choppy markets. But a local report said that Opdenergy, along with the warehouse manufacturing company Mecalux, has now postponed plans to float until at least after the summer.

Recent ECM history is tempering some advisers’ expectations of a bumper year. Over the past few years, IPO activity in Spain has fallen behind several large ECM hubs in Europe. But there were hopes that the country would move forward from an exceptional 2021, when renewable energy company Acciona Energia [BME:ANE] priced a EUR 1.5bn listing, Spain’s largest since 2017, according to Dealogic data.

The years between 2017 and 2021 were more of a disappointment when no IPO over EUR 1bn priced on Spanish exchanges; total deal value over the period was just 6.8bn EUR and Spain represented only 4% of total IPO European issuance since 2017, according to Dealogic data.

“Spain is not one of the most active countries in ECM, not even in good times; it is unfortunate, but it is what it is,” said an ECM consultant. “Over the years we have just been less frequent users of capital markets than other big economies.”

The consultant credited cultural issues such as the fact that many of the families managing big companies are keen to keep businesses under private control, while finding their capital needs fulfilled by the private banking sector – “they don’t need to get overly sophisticated and tap external investors,” he said. There are no political reasons – “it was the same with right and left-wing governments,” the consultant added, saying that families don’t have to report to regulators or shareholders.

M&A and PE investments are much more palatable to these management boards, although this might change as younger generations want to gain more liquidity and are open to different considerations. But for the current holders an IPO is not a “valued route,” he said.

Like the rest of Europe, Spain is also facing inflationary pressure, but an ECM lawyer said it was in a worse position than the rest of EU as the Spanish Government has not taken enough measures to mitigate the problem. The money investors are sitting on becomes costly with the rise in inflation, and these players are more willing to put their cash toward acquisitions rather than capital markets, he added.

However, should Spain’s big three IPOs take place this year, 2022 will be seen as another year of renewal.

It’s all to play for.

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