The charts don’t show it, but the stock market is suffering from a small existential crisis.
The low valuations of some companies, the high requirements for information, the uncertainty after the latest banking turmoil and the financing alternatives offered by venture capital giants full of liquidity have reduced the interest of companies to list on the stock market . What once aspired to any company seems to have momentarily turned into an uncomfortable and dangerous place.
This year there is no advanced project to jump to the floor, but the forecast is that in 2024 the stock market bells will ring again. While companies go to the shore in fear of moving forward, the Ibex accumulates a total revaluation of more than 9% since the year began.
“The problem is that investors are now not willing to pay particularly high multiples”, especially after seeing that “most of the recent IPOs have not performed perfectly”, says Salvatore Branca, head of Equity Capital BNP Paribas Markets for Southern Europe. Added to this are “several episodes of volatility such as that of Credit Suisse, with a scenario of rate and price hikes”. He says this by video conference from London, in a week in which the latest data on debt and inflation in the United Kingdom have caused “some fear in the markets”.
Last year only one company was launched on the Spanish stock market, Opdenergy, and during this 2023 none have done so. Much longer is the list of projects that have been put in the freezer since February 2022 when the markets crashed with the Russian invasion of Ukraine: Primafrio, Mecalux, Repsol renewables and, more recently, Cosentino.
The current episode should be temporary, since, according to Branca, “there is still a lot of liquidity and an important portfolio of IPO projects”. Of course, they will not materialize until 2024 because, even hiring the banks now, it will take between five and seven months for them to be executed.
Javier Fernández-Galiano, Director of Financial Advisory at Deloitte, mentions “the complex geopolitical context, the high levels of inflation in the world and the response of central banks with their aggressive interest rate hikes” as factors that have paralyzed the plans of many companies. His prediction is that in the coming months there will be “some reactivation of the market”, among other things because the stock markets are now behaving better and “have learned to live with all the uncertainties”. “There are companies that are preparing to go public,” he says.
Sources from an international business bank with a presence in Spain confirm that, although hidden, there are potential IPO projects. The market is very attentive to what can happen with Cirsa, OkMobility and, in the longer term, Tendam and Idealista. They are the companies that would end the paralysis and would do so in sectors far from the energy sector, which has been the protagonist of the last exits. The office specialized in White transactions
Meanwhile, the trend towards stock market exclusions has continued. Since 2020, Siemens Gamesa, Biosearch, Euskaltel, Barón de Ley, Solarpack and Zardoya Otis have left the Spanish market. And NH might not take long to do so if Minor continues to buy shares above 94%.
Sources from the CNMV point out that the novelty is not so much these exclusions as the drought of premieres, and that is why the supervisor is working on measures that make it easier for companies to make the leap.
The president of the CNMV himself, Rodrigo Buenaventura, has openly defended the need to reduce the high information requirements for companies that want to start listing and has pointed to venture capital funds as the figure that competes on the stock market. Last year, these investment firms broke a new record again, as they dedicated 8,735 million euros to buy stakes in companies in Spain, according to data from Spain Cap.
Companies have preferred in many cases to “opt for other financing alternatives such as private equity, bond issuance or bank financing”, says Fernández-Galiano from Deloitte.
The investment bank does not want the music to stop playing and those in charge of conducting the orchestra defend the potential of the stock market against venture capital funds. In a report published this week, Blackrock, which is one of the main investors in Ibex companies, considers that the variable income market is preferable to venture capital. “We hope that the risks will dissipate in the medium term”, he says.
Meanwhile, some listed Spanish companies do not hide their frustration at the low stock market valuation. The banks complain that their shares have come to be below their book value and one of the main industrial groups on the Ibex, Acerinox, says that its real value is almost double what the quotation marks. The leader of ITV, Applus, also listed, has agreed to supply information to several international funds willing to launch a bid for the company, which is trading well below its reasonable multiples.
To define the current environment, José Manuel Corrales, Professor of Applied Economics at the European University, draws attention to the “high degree of financial turbulence and the role of the ECB in establishing banking supervision mechanisms â€, which from his point of view will continue to cause uncertainty in the markets in the coming months in Europe and the United States.
The stock market drought also occurs on a European and global scale. According to the first quarter, there were 284 IPOs for just $25 billion, a volume lower than the worst quarter of the pandemic. Geopolitical doubts, interest rate hikes and “unexpected turbulence†contributed to “reducing appetite for IPOs in the first quarterâ€, says PwC in its latest IPO Watch Europe report.
The counterpoint to companies’ fear of jumping into the pool is the temperature of the water. The Ibex is still 8.4% below pre-pandemic levels, but has experienced rises since the beginning of the year and seems to have recovered from the onslaught of the recent banking crisis.
