The IPO market is showing signs of improvement. According to financial sources, two German companies, the pharmaceutical packaging company Schott Pharma and the tank gearbox manufacturer Renk, are expected to kick off their initial public offerings (IPOs) with the intention to float in the next two weeks.

These two companies are likely to face challenges. On average in Europe, the performance of previous IPOs has been less than satisfactory, with an average decrease in share price of 3%. However, according to Goldman Sachs, this doesn't necessarily mean there will be significant price discounts compared to already listed competitors. Christoph Stanger, Chairman of Equity Capital Markets in the EMEA region at Goldman Sachs in London, stated, "If the market environment remains constructive, we expect up to five possible IPOs in Germany in the second half of the year. Issuers typically conduct extensive pre-IPO discussions with investors, and the market also values IPOs with cornerstone investors and an appropriate free float to create liquidity."

Stanger's colleague, Philipp Süß, who is responsible for the ECM business in Germany and Austria, emphasizes a sectoral shift in investor demand: "While in 2021, tech and future rapid revenue growth were in demand, business models with solid, predictable cash flow are now in the spotlight. This benefits companies in traditional German industries".

Even after four tech companies in the US filed their prospectuses with the SEC, traditional German industrial companies with cash flow are back in demand on the stock market, according to Malte Hopp, Head of ECM at Citigroup in Germany. "It's not surprising that Thyssenkrupp Nucera is one of the best-performing IPOs in 2023 ( 8% since the IPO). An industrial company operating in the world of the green energy transition megatrend, and an IPO that aimed to raise money for growth."

Furthermore, Hopp observes the trend of increasing involvement of cornerstone investors, as seen in the recent IPOs of Porsche or Thyssenkrupp Nucera.

Schott Pharma is now expected to serve as an icebreaker for the IPO market in the coming week. The pharmaceutical packaging specialist from Mainz is a subsidiary of the specialty glass company Schott AG and employs 4,700 people, producing syringes, vials, ampoules, and other packaging for the pharmaceutical industry.

The company benefits from the trend of pharmaceutical industry customers increasingly selling their drugs in pre-filled glass syringes - for insulins and mRNA therapies, for example. This positions Schott Pharma well for corresponding flu vaccines. Schott Pharma also has supply contracts with leading manufacturers in the US and Europe, Eli Lilly and Novo Nordisk, in the emerging and rapidly growing market for anti-obesity medications. Their weight loss syringes are experiencing a significant boom, as around one-seventh of the world's population is considered overweight. The business of the German publicly traded Schott Pharma competitor, Gerresheimer, is already being fueled by this new trend.

In the planned IPO, Schott AG could offer around 30% of the shares in Schott Pharma. The value of the subsidiary is estimated at 3 billion to 4 billion euros. Deutsche Bank, Bank of America, and BNP Paribas have been appointed as global coordinators for the IPO.

Similar companies positioned like Schott Pharma, considered comparable publicly traded competitors, include Stevanato from Italy and West Pharma from the US. Stevanato's stock price, listed in the US, has doubled since December. West Pharma's stock price has also increased by about half during the same period.

At the same time, the tank gearbox manufacturer Renk, owned by the financial investor Triton, plans to initiate its IPO. The Augsburg-based company is valued at around 3 billion euros. Since the "turning point" with the war in Ukraine, the defense industry has been highly valued on the stock market. Citigroup, Deutsche Bank, and J.P. Morgan have been appointed as global coordinators for Renk's IPO.

These IPOs will certainly not be a sure-fire success. Activity across Europe has been subdued over the past twelve months. In 2023, only a dozen IPOs were conducted, with seven trading below their issuance price. Notably, the British payment service provider Cab Payments saw a 26% decline in its share price after the IPO. Additionally, the share price of United Internet's hosting subsidiary, Ionos, has decreased by 17% since the IPO.