European companies are going public at a smaller scale than their US counterparts, with the number and value of initial public offerings (IPOs) declining over the past decade, according to a new study from the Bertelsmann Foundation, the Centre for European Reform and the Jacques Delors Centre.
The report, How to revive Europe’s stock market listings, examined European IPOs between 2014 and 2025, and found that 72% had an issued share value of less than €100 million. In the US, the equivalent figure was 49%.
‘Europe’s IPO problem is a scale-up problem that is becoming visible on the stock market,’ the report noted, adding that only 12% of European companies had a market capitalisation of at least €1 billion at the time of their IPO, compared with 29% in the US.
“For better public stock markets in Europe, the right diagnosis is crucial: European companies are too small when they go public,” commented Claudia-Dominique Geiser, senior expert for EU Economic Policy.
“Promoting more IPOs and lowering the admission requirements does not automatically create more liquidity, nor does it necessarily attract institutional investors. Europe must first help its companies grow.”
Focus areas
The authors identify three focus areas where the European Union and its member states could address the issue.
- Mobilise Europe’s savings. Pension reforms and increased private equity investments could channel a larger share of household wealth into stocks. This would improve valuations and liquidity, and support corporate growth.
- Reduce fragmentation. Market-driven integration of European stock exchanges would increase liquidity and attract larger IPOs. This would make it easier to secure more substantial new issues and keep them on European markets long-term. Policymakers should explore the possibility of a pan-European growth market for young companies.
- To produce more companies ready for the stock market, the single market must be completed, more growth capital made available for later financing phases, and incentives created for larger, high-quality IPOs.
‘Venture capital ecosystem’
“Talent and education may form the foundation for innovation, but a well-functioning venture capital ecosystem is its fuel,” added James Green, research fellow at the Centre for European Reform.
“When policymakers strengthen Europe’s technology ecosystem, which is crucial for competitiveness and sovereignty, they must not forget an important piece of the puzzle: well-functioning public stock markets.”
Elsewhere, Marlene Schoerner, policy fellow for EU financial markets at the Jacques Delors Centre, said regulatory and infrastructure fragmentation continues to make cross-border trading expensive.
“A pan-European stock exchange may seem attractive, but it would be putting the cart before the horse,” she said. Read more here.
