Jungfrau Zeitung – Swiss companies are calling off IPOs

Stock markets on the decline | December 3, 2022

The nasty situation on the stock markets has thwarted the stock market plans of some Swiss companies this year. But postponed is not lifted: 2023 could be a better year for so-called initial public offerings (IPO) on the Swiss stock exchange SIX.

Swiss companies were not so brave on the stock exchange this year.Photo: Keystone, Christian Beutler

“Some projects were already quite advanced in the current year,” says Andreas Neumann, head of the equity capital market at Zürcher Kantonalbank, when asked by the AWP news agency. “These had to be suspended because of the environment.” A reactivation of these projects is likely as long as the geopolitical situation and the stock markets stabilize. That means: “There are candidates in the pipeline.”

For the current year, however, the IPO window is already closed: the few weeks left are likely to be too short, as it usually takes three to four weeks between the announcement and the first day of trading, says Neumann. And after the first week of December, IPOs are hardly conceivable.

War in Ukraine thwarts plans

A year ago things actually looked good for the IPO year 2022, but then the general conditions became increasingly cloudy. The bottom line is that it was another below-average year with two listings (Accelleron, Epic Suisse), after there were four new listings in 2021 (Polypeptide, Montana Aerospace, Medmix and Skan) and 2020 was a Corona lull.

The spin-off of ABB’s Accelleron turbocharger division, which has been traded separately on the stock exchange since October, shows that spin-offs without share placements can be carried out independently of the market, says Neumann from ZKB. The spin-off is valued at around CHF 1.7 billion on the market. The real estate company Epic Suisse even successfully placed new shares in the second quarter.

In a long-term comparison, about five newcomers per year are usual in this country. However, the lull was not a phenomenon specific to Switzerland. The number of IPOs worldwide is falling sharply.

Whether it will be enough for a record year, I dare not predict.

Andreas Neumann Head of Equity Capital Markets Zürcher Kantonalbank

Volatility poison for IPOs

Looking ahead to the coming year, it is difficult in the current market environment to estimate how many companies could go public, says Neumann. The stock exchange operator SIX also currently sees the environment for IPOs as “rather cautious”. SIX spokesman Jürg Schneider refers to the Ukraine war, inflation, geopolitical unrest, the macroeconomic environment and Covid.

But improvement is in sight. Neumann from the ZKB explains it like this: The volatility index VIX, which is very popular in the IPO environment, has fallen significantly from 33 to 25 points since October 2022, and the stock markets have recovered at the same time, both of which are positive. However, that is still far too short for a reactivation of the IPO plans: “An even lower volatility of around 20 points and the VIX remaining at lower levels would be ideal for IPOs,” says the specialist.

If the framework conditions are right, there will be individual IPOs again in 2023. But: “I don’t dare predict whether it will be enough for a record year,” says Neumann. Companies with established business models that are already profitable and capable of paying dividends should have an advantage. Since February 2022, institutional investors have increasingly focused on liquid large caps – companies with a high market value. “We expect the window for small and mid caps to open again when markets calm down.”

Mega IPO ahead

It is certain that the pharmaceutical company Novartis will list its generics division Sandoz in the second half of 2023. It would probably be an even larger transaction than the spin-off of the Alcon eye care division, which the Basel company listed on the SIX in 2019 with a market capitalization of just under CHF 27 billion at the time.

Another major candidate would be the French-speaking Swiss skin care group Galderma. The financial investor EQT, which took over Galderma from Nestlé in 2019, will postpone the IPO until autumn or even early 2023, the Reuters news agency wrote, citing insiders. Originally, the listing on the Swiss stock exchange, also worth more than 20 billion, would have been planned for the first half of 2022.