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European Companies Confront IPO Risks as Renk Cancels Float

European Companies

German gearbox supplier Renk was gearing up for its Frankfurt market debut in early October. Encourage positive investor feedback and growing optimism surrounding new stocks. However, the company made a surprising last-minute decision to withdraw its listing, citing market conditions.

Renk’s IPO Withdrawal On European Companies

In the coming weeks, several European companies are slated to enter the market. Including CVC Capital Partners, which plans a November listing, contingent on market conditions. They aim to raise approximately 1 billion euros ($1.05 billion) from the share sale.

Renk’s Challenging Environment

Renk’s withdrawal underscores the challenges that new issuers face, exacerbated by recent volatility in equity and debt markets. Some recent large IPOs in the U.S. have shown mixed performance following initial enthusiasm.

Andreas Bernstorff, head of Equity Capital Markets for Europe, the Middle East, and Africa (EMEA) at BNP Paribas. Commented, “It’s turbulent waters right now, so anything that’s not really well anchored by long-only investors is going to struggle.”

Renk’s Valuation Potential

Renk had the potential to achieve a valuation of up to 1.8 billion euros, but it cited a “clouded” market environment for its decision to pull the planned listing. In the days leading up to its planned listing, Renk’s corporate peers, including Hensoldt and Rheinmetall, saw their stocks decline. Additionally, Germany’s DAX index fell nearly 2%.

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Investor Sentiment and Niche Industries

Some bankers expressed skepticism about Renk’s ability to attract a large following due to investors’ preference for large, liquid stocks and Renk’s niche position in the defense industry. Renk, however, has not ruled out the possibility of proceeding with a listing at a later date.

Renk CEO Susanne Wiegand stated, “We received extremely positive feedback in our numerous discussions with investors… we will continue to concentrate fully on achieving our growth goals.”

Positive IPO Signals

Renk’s IPO was anticipated to follow German medical glass producer Schott Pharma, which saw its shares rise by 16% on its first day of trading. As of Thursday, Schott Pharma was trading around its opening IPO price at 30 euros, still above its issue price—a positive indicator.

These experiences thus far suggest that investors are inclined to invest in new companies only if they are considered “must-own” stocks or if shares are offered at a significant discount, according to a European Companies fund manager.

Upcoming IPOs

Fuel payment card provider DKV Mobility, backed by CVC Capital Partners, is contemplating whether to proceed with its intention to float in October despite challenging market conditions. Meanwhile, French software provider Planisware is seeking investor interest for its upcoming listing on the Paris bourse, with pricing scheduled for Wednesday.

Looking ahead, perfumery chain Douglas and long-distance bus operator Flix are considering IPOs in Germany next year, while German shoe brand Birkenstock has chosen New York for its billion-dollar issue.

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