Book-building Periods Shortened to Avoid Market Volatility
Volatility Has Increased Since Trump's Inauguration
Investor Appetite for European Assets on the Rise
As volatility in global stock markets has increased since President Donald Trump took office, global investment banks (IBs) have been shortening the book-building period for initial public offerings (IPOs) in Europe to protect newly listed companies.
According to Dealogic data on the 8th (local time), for companies listed in Europe, the average book-building period after an IPO is announced has been five days. This is the lowest level on record.
Czechoslovak Group (CSG) was valued at 33 billion euros (about 57.1487 trillion won) on the first day of its listing on the Amsterdam stock exchange last month. This was the largest IPO ever by a European defense company, yet CSG's book-building period was only three days.
Austria's Asta Energy surged as much as 46 percent on the first day of its listing on the Frankfurt stock exchange at the end of January, despite having gone through only four days of marketing (investor solicitation).
Antoine Noblot, Head of Equity Capital Markets for Northern Europe and the Middle East & Africa at BNP Paribas, said, "Since the financial crisis, the key to European IPOs has been risk mitigation."
One factor that has enabled the shortening of the book-building period is strong investor demand for European assets. Investment banks focused on meeting potential investors months before the official IPO announcement, and as assets have become concentrated in a small number of large investment firms, this strategy has produced increasingly successful outcomes.
Noblot, who worked on the CSG deal, said that BNP Paribas had contacted more than 150 investors over several months before the official fundraising period began. He pointed out, "The market is volatile and uncertain. When everyone is desperate to place orders with you, is it really meaningful to spend so much time in the market?"
The sharp global stock market sell-off after U.S. President Trump announced tariff measures in April last year is also cited as a reason for shortening book-building periods. As companies were busy assessing the impact of the tariffs, global deals came to a halt. This year as well, Trump's attempt to purchase Greenland has shaken markets by triggering a political crisis in Europe.
Suanbita Arora, Co-Head of Global Equity Capital Markets at Societe Generale, said, "Everyone is trying to further shorten the execution period of deals to reduce exposure to unexpected market swings."
As global investors move to diversify portfolios that had been excessively concentrated in the United States, investment banks have been able to accelerate the fundraising process. The Financial Times (FT) reported that this diversification trend among investors has, in fact, led them to turn their attention toward Europe.
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