27 November 2020
European equity capital markets advisers have turned east as IPO candidates from Poland, Russia and other Eastern European countries increasingly ponder floating on local and western stock exchanges.
Looking ahead, the pipeline remains healthy even if at a lower deal value than this year, with names such as Polish ecommerce logistics firm Inpost and Lithuanian marketplace Vinted headlining a longer list of IPO hopefuls.
Eastern European ECM volume has hit a three-year high, raising a total of USD 13.3bn (EUR 11.2bn) via 43 transactions year to date — the highest since the USD 11.4bn raised in 2017 YTD, Dealogic data shows.
The uptick in deal value is mainly attributed to three major deals: Allegro’s USD 2.3bn IPO, Yandex’s USD 1.2bn convertible bond and Ozon’s USD 990m dual listing. But others such as Lithuania-based, London-listed renewables player Ignitis, Russian shipping firm Sovcomflot and Czech defence group CZG have joined the public markets in recent months.
Although there has been activity across all types of issuance, Eastern European IPOs have stood out, accounting for 24% of all EMEA flotations – the highest percentage in a decade.
“The considerable flow of IPOs from the region has gotten people’s attention,” a capital markets adviser familiar with the region said, noting its well-developed tech hub as a key driver of activity.
Countries like Estonia, Romania are growing a healthy crop of successful tech start-ups, such as Estonian taxi-hailing app Bolt. Such players are aligned with the current theme in the IPO spotlight - growth-focused equity stories in the digital and tech space, as well as healthcare, the adviser added.
Technology is the leading sector in Eastern Europe’s ECM sector rankings thus far in 2020, accounting for USD 7.3bn of all regional issuance, according to Dealogic data.
Beyond TMT, corporates in retail and natural resources are also considering listings. A case in point is Nordgold, a Russia and West Africa-focused gold miner that is planning a return to the public markets in London, sources told this news service earlier this month.
Although Nordgold is UK-registered there are several other candidates hailing from Russia in the pipeline, including retailer Fix Price, and online cinema platform ivi, which is seeking a US Nasdaq listing.
Boris Kvasov, co-head of ECM at VTB Capital
— which has recently played a role in Ozon, Sovcomflot and Samolet’s listings — said "we see a solid pipeline of ECM deals coming from Russia across different types of ECM products including IPOs, follow-on offerings and convertible bonds. Deals completed this year as well as our existing pipeline demonstrate that investors are ready to look at different industries and types of deals if each particular opportunity is high quality and meets their investment criteria."
Although some CEE issuers might look at their home exchanges, many will target London, European or dual listings to achieve the necessary clout. “Not all Eastern European exchanges are created equally”, the capital markets adviser said, flagging Warsaw’s leading reputation. The Polish stock exchange is a step above its neighbours, in terms of market depth, investor sophistication and underlying economy.
For those looking elsewhere for a stock market home, Brexit and currency fears could mean more will turn towards a Euronext exchange rather than London, the adviser cautioned.