More flotations on the way

By GUY DRESSER
Updated: 19:00 EST, 4 April 2004

EUROPEAN stock exchanges are likely to see a resurgence in confidence for the rest of the year following a strong recovery in flotation activity in the first quarter.

But improved sentiment could easily be damaged by major political or economic upsets, according to markets watchers.

There were 56 flotations in the first quarter of the year on Europe's main stock exchanges, almost four times the level seen in the same period last year.

The companies that came to market were also much bigger as the total offering value of floats in the first quarter was e5.24bn, almost double the e2.62bbn in the last quarter of 2003 and a huge increase on the e77m figure of a year ago.

The figures are distorted, however, by the flotation of Belgacom (e3.29bn), which accounted for 63% of the total offering value.

Tom Troubridge, head of the London capital markets group at PWC said the figures should not be seen as a return to the heady days of the late 1990s. He said:

'As the pulling of the two technology floats in Germany may have shown, it is perhaps too early to bring companies to market that are not generating strong cash flow and paying dividends.

'It seems that the dot com boom of a few years ago has left a bad taste in the mouth of investors who are less interested in companies approaching the main equity markets that are still at an early stage in their development.'

Troubridge warned investors not to get carried away though: 'London and Euronext remain the dominant exchanges. However, confidence is fragile and can easily be undermined by global economic or political events.'

London accounted for 70% of all initial public offerings in the first quarter, up from 61% in the last quarter and 53% on a year ago.

London had 39 flotations with a total value of e1.1bn - the vast majority of these were on the Alternative Investment Market.

PWC's figures come just a week after another survey from accountants KPMG that revealed a surge in the number of companies planning to come to the market later this year.

According to KPMG's Neil Austin, companies with proven track records or established market positions are confident about their flotation prospects - but only companies with the right financial structures in place will be able to do it.

'An initial public offering is now a genuine option for some when considering realisation strategies - but only for the right companies with traditional valuation metrics,' he added.