Last month, my friend Nicolas Colin, a Director at The Family, described Europe’s tech IPOs as “boring” in a newsletter. Among other points, Colin argues the need for a deeper ecosystem that links Europe’s entrepreneurs with capital markets. Large IPOs are a big part of this:
We may have IPOs of companies with a European footprint such as Spotify and Farfetch—and the resulting liquidity. But when a European company goes public in the US we miss out on the positive feedback loop that nurtures an ecosystem of investment bankers, analysts, and institutional investors, which in turn will help more European companies go public. What’s more, those IPOs in the US are dependent on the ups and downs of the (partially uncorrelated) US IPO market—and that’s a problem. Nothing like the WeWork debacle has happened here in Europe, but now our tech companies should shelve their IPOs because Adam Neumann was a fraud and SoftBank was negligent in its due diligence? What does it even have to do with us?
A debate over the veracity of Colin’s claim spilled into social media, which focused more so on what one considers “boring” than anything else. Word choice aside, I presume that by “boring” Colin meant “small.” On that, he has a point. In both a game of averages and outliers, many of Europe’s most valuable startups have in fact looked to American exchanges for public listings.
I analyzed data from PitchBook on European venture-backed companies that had an IPO since 2010. I grouped each IPO by exchange and then aggregated counts and value at IPO (the market capitalization on the first day of public trading).
The clear majority of Europe’s venture-backed IPOs listed on European exchanges this decade, but many of the biggest startups looked to American markets for liquidity. Since 2010, 41 European venture-backed company IPOs were listed on the NASDAQ or the New York Stock Exchange, or 10% of the total. But those that did were disproportionately large—accounting for $55 billion in IPO exit value, or 45% of the total.
The biggest was Spotify’s direct listing on the NYSE ($29.5 billion valuation at IPO) in April 2018, followed by Farfetch’s IPO last September, also on the NYSE, which valued the company at $5 billion. Other notable European venture-backed IPOs listed on U.S. exchanges include biotech firms BioNTech, Novocure, Adaptimmune Therapeutics, and Orchard Therapeutics, as well as the advertising platform Criteo. Each had post-IPO valuations above $1 billion.
But, grouping all European exchanges together misses a considerable amount of detail. In fact, seven of the ten largest European venture-backed IPOs this decade were listed on European exchanges—Rocket Internet ($8.4 billion valuation at IPO), Zalando ($6.8 billion), Delivery Hero ($4.9 billion), and Hello Fresh ($1.8 billion) in Frankfurt; Adyen ($8.3 billion) in Amsterdam; and Just Eat ($2.4 billion) and Funding Circle ($2 billion) in London. Even so, seven of the top 15 largest IPOs, or about half, were listed in the U.S.
Deutsche Börse, which manages the Frankfurt exchanges, has hosted the largest listings in Europe. In fact, the $1.7 billion average valuation size of European venture-backed IPOs in Frankfurt is larger than the $1.3 billion average taken across NASDAQ and NYSE. At $400 million, the London Stock Exchange is a distant second, followed by a smattering of exchanges such as the Alternative Investment Market in London, the various Euronext exchanges (most notably in Amsterdam, Brussels, and Paris), and the Nasdaq Nordics, among others, which list many venture-backed IPOs but at a much smaller size.
The data overall show plenty of nuance, as exchanges in Germany, UK, and elsewhere do capture a number of large public offerings of venture-backed companies. But the point remains: most European venture-backed IPOs are small, and the continent has missed key opportunities to strengthen the entrepreneurial ecosystem around capital markets—as some of its largest and most historic venture-backed IPOs have found a better home on American exchanges.