(Bloomberg) -- Bankers are pinning their hopes on a few large private equity-backed listings to rekindle Spain’s IPO market next year, after several candidates postponed plans to go public in recent months blaming tough market conditions.
Casino operator Cirsa Enterprises, owned by Blackstone Inc., and travel technology firm HBX Group, backed by Cinven and CPP Investments, are planning to launch their initial public offerings in the first half of 2025, which could raise in the range of €1 billion ($1.1 billion) each, Bloomberg has reported.
If successful, the floats, coupled with decreasing interest rates and returning equity inflows, could pave the way for others to follow suit.
“That makes the environment more attractive for issuers to come to market in 2025, as long as they can demonstrate financial momentum,” said Salvatore Branca, head of equity capital markets for Southern Europe at BNP Paribas SA.
After a quiet few years, 2024 was tipped to be a watershed for Spanish listings spearheaded by Puig Brands SA’s €2.6 billion IPO in May, the country’s largest for nearly a decade. But things haven’t turned out exactly as hoped.
Shares in Puig, the owner of beauty brands Rabanne and Charlotte Tilbury, have struggled to recover from disappointing earnings in September and are down 19% since listing. Water and energy utility Cox Abg Group SA has been fluctuating around the price of its downsized IPO.
Other local firms have put their listing ambitions on ice, including bakery group Europastry SA, fashion retailer Tendam and Bergé y Compañía unit Astara.
Donald Trump’s imminent return to the White House adds a further layer of complexity for companies weighing IPOs. Investors are concerned about some of the US president-elect’s policy plans, including the potential risks for global trade patterns from his threatened tariffs.
“The geopolitical context and uncertainties do not help,” said Alvaro Castro, head of equity primary market at Spanish exchange operator Bolsas y Mercados Españoles.
Even so, Castro said he remained “reasonably optimistic” about the IPO outlook, given the number of companies that attempted going public this year and the others waiting in the wings.
“The important thing is the long term and that companies understand, as they increasingly do, that being listed on the stock exchange brings reputation and visibility to companies,” he said.
Valuation Matters
Dealmakers are looking to the US for signs of a pick up in IPO activity, with history suggesting that increased American deal volumes are likely to be followed by the rest of the world. Spain may be better positioned than some European neighbors to ride that wave, according to Andre Pereira-Ambrosio, head of ECM for Iberia at Alantra Partners SA.
Spain’s economy, hit hard by Covid-19, is on track to grow 3% in 2024 and 2.3% next year, ahead of the euro zone, according to European Union forecasts. Meanwhile, the Spanish IBEX 35 stock index is up around 15% year to date, outpacing the regional Stoxx 600 benchmark.
This doesn’t mean the doors will open widely to all IPO candidates.
“Mid-to-large cap companies with unique stories will be able to go public under favorable conditions, while small-cap candidates will continue to face challenges,” Alantra’s Pereira-Ambrosio said. “For these smaller companies to access the market, they will have to be more flexible with their valuation expectations.”
Indeed, the mismatch in valuation expectations between issuers and investors has been a hurdle to deal activity, and will remain so unless sellers — in particular private equity firms — are able to compromise on price, according to Roberto Scholtes, head of strategy at wealth manager Singular Bank.
“The inflection point could rather come from more pressured PE funds asking for lower valuations,” he said.
Still, if economic and geopolitical risks wane, and provided transactions come at attractive prices, Spain should see a “more favorable” environment for IPOs, said Natalia Aguirre, head of research and strategy at Madrid-based Renta 4.
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