European public offerings have slowed to a trickle in 2023, but venture capital investors are expecting several high-quality European listings will be on the way when the IPO window reopens.
Speaking at the SuperVenture conference in Berlin on Tuesday, Ross Morrison, a partner at Chicago-based Adams Street Partners, said that while investors can’t predict when the IPO market will heat up again, Europe will be in a solid position to take advantage when it does.
The IPO market “might not actually open with a whimper but with a positive bang because of the attractiveness of a whole cohort of companies who are currently ready to go public,” Morrison said.
Ongoing volatility in the public markets and a lackluster appetite for tech stocks has contributed to the low number of VC-backed companies going public in Europe so far this year. The total of nine in Q1 is less than half the number completed during the same period a year ago, according to PitchBook data.
Morrison said that many companies in Europe that have filed S-1s are already generating hundreds of millions of revenue and have an annual growth rate between 50% and 100%. Those numbers suggest the next rebound in the IPO market will likely be bigger and quicker than the one that followed the dot-com bust.
Left Lane Capital managing partner Vinny Pujji added that the quality of companies heading toward IPO is healthier now than in 2021’s IPO peak.
“The quality of companies going public two years ago was objectively lower,” Pujji said. “Back then, they were probably burning a huge amount of capital and weren’t planning on being profitable for three years. If you looked at the unit economics, they were subpar. But now, if a company is pre-IPO and making the necessary preparations, it’s probably already profitable. What we’re seeing is that the high-growth companies are now the highest quality companies as well.”
Featured image by Serdar Tibet/Shutterstock
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