Initial offerings of European technology companies at 10 year lows

The availability of private financing reduces the attractiveness of listing slates investors express regret that there are no European champions capable of competing with U.S. companies.

Although news about tech stocks around the world makes headlines, the most important sector news in Europe is about a company looking to leave the public markets.

The European company, Rocket Internet, which is building internet startups, based in Berlin, has brought at least nine initial public offerings (IPOs) to the market in the past five years, but recently said it would be in better shape as an unlisted company.

According to Bloomberg News, the rationale for this move is very familiar. Access to private financing is very easy, in a way that reduces the need to maintain a listing on the stock market, and thus the decision adds to the long-term problems of the technology industry in European capital markets.

In this regard, investors expressed their regret that there are no European champions who are able to compete with heavyweight American companies, including Apple and Alphabet, which is followed by Google, and there is no evidence that the region is about to produce a single champion. soon.

"Bloomberg" explained that the scarcity of technology companies is the biggest problem facing Europe, and thus the decrease in the number of start-ups and Greek companies, which are companies with a capital of more than one billion dollars.

Even for firms that begin their footsteps in the region, the United States often becomes their biggest market, says Oxy Jorkot, managing director at Bank of America, a pioneer in technology creation in the capital markets franchising of Europe, the Middle East and Africa.

Data collected by "Bloomberg" showed that only 16 technology companies were launched in Europe this year, the lowest number in more than a decade.

Moreover, surplus liquidity private investors have bought into many IPO candidates, which has increased unlisted companies' valuations in doing so, and shielded European public markets from higher prices.

The valuation gap in Europe becomes more pronounced when compared to the United States and Asia, which makes corporate listings less attractive for technology firms.

"If Tesla is listed in Europe, its value will be at half or even 20% of its current value," said Shaunak Mazumder, global equity fund manager at Legal and General Investment Management, explaining that American investors are aware of the strength of the turmoil and have witnessed these events from Before, while European funds are focusing more on profit at the expense of innovation.

Gorkot, of Bank of America, said that there are more specialized technology investors in the United States who understand specialized technology companies better, along with a larger group of peers and similar shares in the market, but that does not mean that it is difficult to get good reviews in Europe. .

Financial services was one of the areas of the technology world that thrived in Europe and which witnessed landmark deals. Some of the largest IPOs in the old continent in 2019 came from payment service providers Nexi SpA and Network International Holdings.

The "Unifeed Post" financial technology group recently announced its plans to list on the European Stock Exchange "Euronext", expecting to raise up to 212 million euros (252 million dollars).

Debasish Chakrabarti, portfolio manager at Alliance Bernstein, said that the European technology industry has the potential to play a role in each of the four major technology sectors, which are semiconductors and the associated capital expenditures, technological devices, software and financial technology. The best financial technology companies, including the Dutch "Adien" and "World Pay" of America, emerged from Europe.

However, European stock exchanges generally lack listing rules that give founders more voting rights and greater protection, which has attracted some technology companies abroad.

For example, the Swedish broadcasting service Spotify Technology and the UK-based retail technology group Farfetch have opted for a US IPO in recent years.

The matter did not go unnoticed .. Rather, European regulators tried to enhance the technical listings and support emerging companies in light of the outbreak of the coronavirus pandemic, so France has established a rescue fund of 4 billion euros for small local technology companies, and Germany is also considering providing a rescue package for the sector.

Gorkot, at Bank of America, expects very few technology companies to come onto the market in the region during the next 9 to 12 months.

European technology companies that are said to be lining up for initial public offerings in the coming months include the Polish e-commerce giant "Allegro" and the British cybersecurity company, Darktrace, and the Swedish payment service provider, "Klarna Bank AB", also announced that it is preparing for an IPO next year or so. About that.