Europe’s IPO market remains ‘depressed’: Goldman

Europe's IPO market remains significantly depressed, with only 30 listings this year marking the lowest level outside a recession, sharply contrasting with the robust recovery in U.S. equity issuance. Goldman Sachs attributes this to structural differences and the draw of deeper U.S. liquidity, though notes a historical lag suggests a potential European pickup in late 2025 or early 2026. The sustained 10% average return of recent quality European IPOs since 2024, double the long-term average, is seen as a critical precondition for broader market reopening, with financial services firms poised to benefit from any revival.

Analysis

According to a Goldman Sachs analysis, the European IPO market remains significantly depressed, starkly contrasting with the robust recovery in U.S. equity issuance. European activity has been muted since 2022, with only 30 IPOs completed this year, marking the lowest level outside of a recession. This is juxtaposed against the U.S. market, which experienced its strongest IPO wave in four years during the third quarter. Goldman's strategists note that Europe's IPO cycle historically lags the U.S. by approximately one quarter, suggesting a potential pickup in issuance activity could materialize in late 2025 or early 2026. However, structural headwinds persist, as some European companies continue to opt for New York listings to access deeper liquidity and higher valuations. A critical precondition for a broader market reopening is the sustained outperformance of quality listings; IPOs since 2024 have delivered an average 10% return three months after pricing, double the long-term average of 5%. Should this trend foster sufficient confidence, financial services firms with exposure to underwriting and advisory revenues are expected to be the primary beneficiaries of a market revival.

Key Decisions for Investors

• Consider building positions in European financial services firms with significant equity capital markets (ECM) operations, as they are primed to benefit directly from a potential revival in IPO activity projected for late 2025 or early 2026.
• Adopt a selective approach toward new European listings, focusing on high-quality issuers that have demonstrated an ability to outperform, delivering an average 10% return three months post-pricing since 2024.
• Monitor European equity issuance volumes and the after-market performance of new listings as key indicators to confirm a sustained market reopening before making significant capital allocations, acknowledging the continent's cyclical lag behind the U.S.