Yacht maker Ferretti's cancellation caps dismal European IPO season

By Arno Schuetze and Abhinav Ramnarayan

FRANKFURT/LONDON (Reuters) - Italian luxury yacht maker Ferretti's cancellation of its initial public offering (IPO) has capped a dismal European season for stock market listings, with cautious optimism evaporating amid global trade tensions and Brexit angst.

Ferretti said on Thursday it had decided to pull its initial stock offering because it is not satisfied with the price. It is the fourth cancellation in Europe this month, with Kazakhstan's Kaspi.kz postponing a London float earlier this month and Germany's Domicil Real Estate and Logistrial pulling their deals. Elsewhere, private equity company KKR & Co (N:KKR) axed the listing of Latitude Financial in Australia.

Behind the scenes, Swiss vending machine operator Selecta put its own plans for a 2019 IPO on ice after some early investor meetings led management to conclude the valuation they wanted was not achievable currently, people close to the matter said.

This leaves just fellow Swiss firm SoftwareONE still in the market, though that company has had a strong response for its nearly 1 billion franc (778.1 million pounds) trade. "It feels like IPOs are being pulled left, right and centre," said one banker who manages equity fundraisings and was working on some of the upcoming deals, declining to be named. "There are many reasons for this of course, but the overarching factor is that Brexit is just hanging over Europe. Some sort of (Brexit) deal would really provide a lot of relief," he said.

The European Union and Britain have clinched a deal on the terms of Britain's exit from the bloc but there is fading optimism that the British parliament will approve the agreement.

It has been a challenging year for the European IPO market, with investor sentiment battered by expectations of an economic slowdown as Brexit and the U.S.-China trade war take their toll. Ten European IPOs set to raise $2.3 billion have been cancelled since the start of the year. Year-to-date, 79 European IPOs have raised $18.7 billion, according to Refinitiv data, comparing with $39.4 billion in 146 IPOs over the same period in 2018.

Nor is it just a European issue, with overall global equity capital markets volumes in the first three quarters hitting a seven-year low.

"The markets are extremely volatile beneath the surface of stock index peaks. Investors are looking for growth or secure assets with stability and sufficient size and liquidity," said Christoph Stanger, co-head of equity capital markets at Goldman Sachs (NYSE:GS), saying that investors are very selective as a result.

In a rare bright spot, African mobile networks operator Helios Towers Plc priced its IPO at the low end of its range, but have traded up slightly on since their market debut in London on Tuesday. Germany's 5 billion euro software maker TeamViewer (DE:TMV) successfully listed on the Frankfurt stock exchange in what was the biggest European IPO this year so far, but has since dropped almost 10% below the offer price.

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"In a generally selective market environment, IPOs of non-cyclical companies worked which are showing good growth. Another crucial factor is good visibility regarding investor demand at the start of bookbuilding," says Deutsche Bank's Josef Ritter, head of ECM Europe.

The rest of the country's hopefuls for the autumn season - Domicil, Logistrial and Congatec - all shelved their IPO plans, while German biotech BioNTech SE (O:BNTX) tumbled on its Nasdaq debut, another sign of weakness in the IPO market after the collapses of the IPOs of U.S. WeWork's entertainment and talent agency Endeavor pulled their listings last month.

That said, the privatisation IPO of French state lottery Francaise des Jeux -- expected to price in November -- could give the markets a boost, while bankers said 2020 could prove even brighter. Germany IPO activity should normalise with six to nine deals and combined IPO proceeds of more than 4 billion euros expected next year, said Stefan Weiner, head of JP Morgan's equity capital markets business in Germany, Austria, Switzerland.