European stock exchanges, including Deutsche Boerse and Euronext, are ramping up efforts to retain local initial public offerings (IPOs) amidst fierce competition from U.S. markets. The European and UK IPO landscape has witnessed a notable decline in activity over the past couple of years, with many local companies opting for the perceived advantages of U.S. exchanges.
Deutsche Boerse, the operator of the Frankfurt Stock Exchange, has highlighted the disadvantages of listing in the U.S., citing lower post-IPO performance and higher costs. Their analysis reveals that European-listed companies tend to have more successful first-day trading than their U.S.-listed counterparts. Additionally, European IPOs often outperform in their home markets over time.
Euronext, managing multiple markets including those in Amsterdam and Paris, is set to release similar findings. Both exchanges are challenging the notion that U.S.-listed firms command higher valuations than European ones. This mirrors the efforts of the London Stock Exchange, which is also striving to dispel the belief in superior U.S. valuations.
European regulators are exploring ways to strengthen the continent’s capital markets, given the stark contrast in market capitalization between the U.S. S&P500 index and Europe’s Stoxx 600. According to IndexBox, around 130 European companies, valued at a total of $667 billion, have shifted their listings to U.S. markets in the last decade. However, a significant portion of these companies are trading below their listing prices, with an average decline of 9%.
Deutsche Boerse’s data indicates that German companies listed in the U.S. have experienced a 13% average decline since 2004, while those listed in Frankfurt have seen a 24% increase. Despite these statistics, some experts remain cautious, noting the continued relative strength of U.S. markets compared to their European counterparts.
Market experts emphasize the need for European exchanges to adapt and innovate to retain IPOs in the face of intense U.S. competition. The dynamics of global capital markets are evolving rapidly, and European exchanges must enhance their offerings to attract and retain local companies seeking to go public.
Efforts to deepen Europe’s capital markets are crucial for fostering economic growth and competitiveness on a global scale. By providing robust alternatives and addressing the challenges faced by local companies, European exchanges can position themselves as attractive options for IPOs and other financial activities.
The ongoing battle between European exchanges and U.S. markets for IPO dominance underscores the importance of adaptability and strategic positioning in the ever-changing landscape of global finance. As both sides continue to refine their strategies and offerings, the outcome of this competition will shape the future of capital markets on both sides of the Atlantic.