Over three-quarters of European VC-backed companies that have gone public since 2021 have seen their shares fall below their listing price as market volatility hits tech companies.
VC-backed IPO activity in Europe has slowed significantly this year, with 2022 on track for the fewest public offerings since 2019, according to PitchBook data. A total of 45 companies listed with an aggregate value of €5.2 billion (about $5.5 billion), a decrease of 74.4% and 93.5%, respectively, from 2021.
A significant deterrent for new IPOs has been the poor performance of many that went public in recent years. As of Dec. 7, some 84.5% of the companies that went public since 2021 are trading below their listing price, and over half have seen their shares fall by over 50%. (This data is limited to companies that have listing and current share prices available.)
Last year saw a flood of mega-IPOs and direct listings that offered investors the chance to realize outsize returns for their portfolio companies. The soaring levels of VC investments in European startups resulted in inflated valuations which, once in the public arena, were often not well-received.
On top of that, heightened volatility caused by geopolitical events and macroeconomic factors, including rising interest rates, led to further reductions in share prices across public markets. Global tech companies including Meta and Microsoft saw billions of dollars wiped off their market caps. The median IPO post-money valuation for European VC-backed companies has fallen from €65.2 million last year to €30.3 million in 2022.
Many of Europe’s high-profile listings from the last two years have suffered share price losses. When fintech company Wise went public in July 2021, it was valued at £8 billion (about $9.7 billion), but its shares have since dropped over 25% as of Dec. 7. Israel-based software business Monday.com saw a similar fall following its June 2021 IPO. Deliveroo, which held the UK’s largest public listing in a decade in terms of market cap, was down more than 75% as of Dec. 7.
However, the continent has still seen impressive performance from some of its formerly VC-backed companies. For example, biotech company Immunocore surpassed $60 a share this month, after going public at $26 apiece.
Despite further valuation cuts expected in the private markets and less widely available capital, going into the new year, some startups may still prefer to stay private for longer rather than risk a bigger loss in the public markets.
Featured image by Immersion Imagery/Shutterstock
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