Something worrying is happening in Europe's financial centres. There are more delistings than IPOs.

Takeovers by competitors or private equity investors are usually responsible for the disappearance of companies. In 2024, 22 companies departed from the exchanges in Germany, seven from the more heavily regulated Prime Standard of the Frankfurt Stock Exchange. Wind farm operator Encavis was taken private by KKR. Telefónica Deutschland (market capitalisation 7.2 billion euros) was absorbed by its parent company Telefónica. The Synlab laboratory chain, controlled by private equity firm Cinven, was delisted. And Südzucker subsidiary Cropenergies was subjected to a public delisting tender offer.

This year the next delistings are already in the pipeline. Private equity firm CVC is acquiring Compugroup. TA Associates is acquiring the software company Nexus, and Carlyle is acquiring the software company SNP Schneider Neureither.

The exodus from the stock exchange is in stark contrast to IPO activity. By way of comparison, the only new IPOs in Germany in 2024 were the armoured gearbox manufacturer Renk, the perfumery chain Douglas, and the scientific publisher Springer Nature, which raised a total of just 2.3 billion euros. Compared to the previous year, the IPO market thus remained at the same low level. There has not yet been a single IPO in Germany this year – although the 10 billion euros generics group Stada from the Bain and Cinven portfolio, and Oldenburgische Landesbank, are all pressing ahead.

Things are hardly looking any better across Europe: According to Bloomberg, only 2.5 billion dollars have been raised in European IPOs so far this year. Last year, the IPO volume had climbed by 30% to around 20 billion dollars, led by companies such as the skin care group Galderma from the financial investor EQT in Zurich and the private equity firm CVC in Amsterdam.

In the USA, on the other hand, 64 companies have gone public so far this year (half of them with issue proceeds of more than 50 million dollars), according to data from Berenberg, raising a total of 10 billion dollars in issue proceeds – although this is not exactly a heady amount compared to the boom year of 2021.

The possible pull effect that the US stock exchanges could have on some of the European IPO candidates, as is feared here in Germany, is being observed with suspicion. According to Berenberg, there were seven companies in 2024 that migrated from Europe to the US with their IPO. According to Goldman Sachs, the three largest of these emigrants in terms of issue proceeds were the Finnish sports equipment manufacturer Amer Sports, the UK Marex Group, which specialises in financial services for commodity producers, and the British Spac (Special Purpose Acquisition Company) Tavia.

The loss of these lightweight companies to the USA is easy to cope with. However, there are also some candidates that would be a shame to lose. The most valuable German start-up Celonis, for example, has long been rumoured to have plans to go public in the USA, especially as the company has dual headquarters in Munich and New York.

There is no longer any need to speculate about a transatlantic IPO for Swedish payment services provider Klarna. The Stockholm-based company („buy now, pay later“) is aiming to raise 1 billion dollars in proceeds from its initial listing in New York planned for April, with a market capitalisation of around 15 billion dollars.

The IPO of the payment services provider, which was financed by venture capitalist Sequoia Capital, is likely to give a boost to IPOs in the technology sector, which have experienced a relative lull after record volumes in 2021. Other US tech companies such as Chime Financial, Coreweave, Databricks, Stripe and Zilch Technology are also considering IPOs this year.

A number of IPOs by (fin-)tech companies are also being discussed in Europe. These include, in particular, Raisin and Sumup in Germany, Bitpanda in Austria, Revolut in the UK and Etoro in Israel. Other tech start-ups in Germany such as Personio and Celonis have achieved unicorn status and have already been linked to IPO plans. Neobrokers such as TradeRepublic and N26 or AI defence companies such as Helsing are also promising.

Perhaps the Swedish expatriate Klarna will remain alone with its US IPO: „Klarna's business model suits the USA,“ says Bastian Schiedat, Head of Equity Syndicate Continental Europe at Berenberg Bank. „Globally active tech companies like Klarna always consider this option in an IPO. However, it will definitely not have a knock-on effect on other companies. The only alternatives for Klarna would be a listing in Amsterdam, London or Frankfurt. But that wouldn't be more natural for a company with Swedish roots.“

Estimates of Klarna's valuation have fluctuated greatly in recent years. In a financing round in 2021, the value reached a high of 45.6 billion dollars, only to fall to 6.7 billion dollars in a round the following year. Last year, analysts valued the company at around 14.6 billion dollars based on the estimate of shareholder Chrysalis Investments.

Even if there is no real pull effect from Klarna, there is once again a threat of companies migrating to other stock exchanges. Europe had to cope with a bloodletting in this respect in 2023. Twelve out of 15 „emigrants“ from Europe went to the USA, according to EY. The traditional company Birkenstock, for example, made its debut in New York with a market capitalisation of 8.6 billion dollars. Previously, the heaviest weighted Dax company Linde had already moved its listing overseas. Other examples of expatriates in the listing were the Swiss shoe company On Running, the Swedish oat milk brand Oatly, and the British chip designer Arm. Irish building materials manufacturer CRH moved its main listing to the USA under pressure from activist investor Cevian – partly because a higher valuation was hoped for there.

According to Julian Schulze De la Cruz, Co-Head of Capital Markets at Noerr, „scalable tech business models, especially if they are already profitable, are generally in high demand among international investors – the advantage of an IPO in the USA can be – despite the higher admission and follow-up costs – to achieve a significantly higher valuation.“ The reasons given for this are manifold: The higher demand from institutional investors, the more professional analysts and banking structures and the higher reputation and appeal of the listing in the USA.

For a successful IPO in the USA, however, the business models should ideally also be usable in the USA, according to Schulze De la Cruz: „The extent to which Klarna's announced IPO can therefore have a pull effect cannot be answered in general terms, but depends on the business model, size and composition of the shareholders", he says. .With an internationally applicable business model and a globally diversified group of shareholders, as is the case with „decacorn“ Celonis, an IPO in the USA would therefore be an obvious choice. For more regulatory-driven business models focused on Europe, such as Raisin or Bitpanda, an IPO in Europe (or Germany) is more likely.

Seth Rubin, Global Head of Equity Capital Markets at the US investment bank Stifel, has observed an increasing interest from mature European companies from all growth sectors in broadening their shareholder base and tapping into the world's largest pool of capital. "They usually find it here in the US,“ he says.

Both companies and financial investors as owners are increasingly examining capital increases via ADRs (American Depositary Receipts) or the spin-off of certain business areas via an IPO in the USA. „In our view, the US IPO of a European company makes the most sense if the move is truly strategic, and not just aimed at potential valuation arbitrage, which is often the reason for it.", says Rubin.