French software company Planisware became the latest European company to suspend a listing on the stock market yesterday, citing challenging market conditions.
Its listing was due to be the largest IPO on the Euronext Paris in two years but was pulled at the last minute, making it the third listing to be mooted then withdrawn in a week.
A host of European companies have recently postponed their stock market debuts amid a market of high-interest rates and depressed market valuations.
Other companies to pull IPO plans this past week include Renk Group AG, a German military gearbox supplier that counts private equity firm Triton among its investors, and CVC Capital Partners-backed German toll company DKV Mobility.
Can you be too oversubscribed?
Of the three, Planisware was perhaps an exceptional case, because according to reports the sale of new shares in the company was oversubscribed on the day of its planned debut, meaning it had more buyers than shares to know what to do with.
Even despite having a slew of investors lined up to buy stakes, the company decided at the very last minute to cancel its listing and remove those shares from sale and return them to investors retroactively.
Planisware’s co-founder Pierre Demonsant said in a public statement to the market yesterday, explaining the company's decision to stop the IPO at the last minute, that the market environment had “deteriorated”.
He added that investors remained “extremely cautious” as a result of the ailing environment for stock market listings.
The French software company had set the price at €16 per share, which was at the low end of the €16-€18 pricing range.
But that cautious pricing wasn’t enough to allay fears that the market might not play ball.
Global IPO market trends
There has been a dearth of global listings and capital markets activity more generally this year.
According to Ernst & Young, global public listing volumes sank 5% this year through to September, and pricing was even poorer, with total IPO proceeds in the first three quarters of this year a third less than they were during the equivalent part of last year.
While listings in the Europe, the Middle East, India and Africa (EMEIA) market were almost flat on last year, with a slight 2% increase, overall IPO pricing suffered a bigger reduction, representing a 44% loss in proceeds.
One phenomenon that is haunting companies on the stock market right now is a devaluing of shares shortly after a hyped stock market listing.
A study by OTC Markets Group published in September showed that 92% of companies had seen their share price negatively affected after a listing.
In a review of 91 deals and how those companies performed on NASDAQ and NYSE AMEX, the study found that the overall average return value after listing represented a 64.8% negative rate of return from their offer price.
Related IPO issues for Birkenstock and Arm Holdings?
Birkenstock’s IPO is a case in point.
The sandal-maker has struggled to find its footing after its market debut yesterday, with its share price trading 12.6% lower than its listing price by the end of the first day of trading on the New York Stock Exchange.
Big players are being cautious about how they price shares in order to avoid the chagrin of those shares plummeting in value after the initial buzz.
This has led some companies to price in the mid to lower end of their pricing range, even if there is significant demand.
Softbank meanwhile priced semiconductor chip design firm ARM Holdings at the higher end of its price range, at an IPO price of US$52 per share, but that represented a total valuation that was markedly lower than the implied price tag it paid to transfer a 25% stake in the company from its Vision Fund.