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Trump’s Tariff Risks to Loom Over Europe’s 2025 IPO Pipeline

An 'IPO' sign and bell on a balcony above a trading floor inside the Euronext NV stock exchange in Paris, France, on Monday, March 13, 2023. Investors poured money into the safest assets, snapping up government bonds and gold, and unloaded bank shares as the collapse of Silicon Valley Bank reverberated across trading desks. Photographer: Nathan Laine/Bloomberg (Nathan Laine/Bloomberg)

(Bloomberg) -- Donald Trump’s victory in the US presidential election has cleared an immediate hurdle for new European stock sales, but uncertainties around tariffs and other policies raise questions over the region’s longer-term prospects.

Spanish utility Cox Abg Group SA and Croatian grocery chain Studenac Group SA have pressed on with initial public offerings this week in an attempt to list before investors close up shop for the year. Others may still follow, as well as the year’s last batch of overnight placings after companies report earnings. On Thursday evening, Goldman Sachs bankers were marketing a block of shares in CVC Capital Partners Plc after the stock rallied on inclusion to a global index.

But while the swift election conclusion removed some market uncertainty, the bulk of Europe’s initial public offering pipeline is weighted to 2025 when Trump is due to step into office. Questions around import duties and the conflict in Ukraine are weighing on the outlook.

“The impact of President Trump’s re-election on the European IPO pipeline won’t be apparent for some time,” said Adam Farlow, Baker McKenzie partner and global capital markets chair, who warned that long-term effects of tariffs would hurt Europe’s economy and IPO candidates exposed to it. 

Trump has floated the idea of imposing a 10% to 20% tariff on all goods coming from abroad, which analysts say could impact Europe’s export-reliant industries such as autos and chemicals. The President-elect has also voiced skepticism over climate change and vowed to put an end to the war between Russia and Ukraine.

“The narrative on European stocks has been made more complicated after the election of Trump, so therefore one shouldn’t expect a flourishing market for IPOs,” said Vincent Mortier, chief investment officer at Amundi SA, Europe’s biggest fund manager.

Europe has seen a modest recovery in IPOs this year, with $19.2 billion raised to date across regional bourses, according to data compiled by Bloomberg. 

The region, however, has seen a string of local companies list in the US, in search of perceived higher valuations and a deeper liquidity. 

A post-election record-high for the S&P 500 index and a rally among technology stocks could make the US a more appealing listing destination, advisers say.

“People will be trying to figure out what the result means for deals. For example, if Trump reduces corporate tax rates that could make valuations increase in the US, so that may make listings there more attractive,” said Chris Mort, global co-head of capital markets at Freshfields Bruckhaus Deringer LLP.

To be sure, bourses in Europe could benefit in the event of any potential flare up in geopolitical tensions. Fast-fashion group Shein is one such example. The company filed papers for a London IPO this year after an earlier attempt to float in the US was met with opposition from local politicians.

And support for Europe’s IPO market may come from Germany, where the prospect of a general election early next year could be good news. Advisers have been hoping for a revival in listings in the coming months with pressure mounting on private equity funds and corporations to showcase value to investors.

“At the moment it’s difficult to see any changes to IPO plans in either direction,” said Andreas Bernstorff, head of ECM in Europe, the Middle East and Africa at BNP Paribas SA. “But there’s a clear outcome which gives boards clear assumptions to work on.”

 

(Updates with CVC details in the second paragraph. An earlier version of this story corrected the title in the last paragraph.)

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