(Bloomberg) -- European fund managers expect a boom in sales of existing shares in listed companies to resume after the summer, with private equity holdings tipped as a likely source of supply.
In contrast to a lukewarm initial public offerings market, Europe has been a hot-spot for block trades and other offerings with almost $33 billion raised in the past eight months alone — a 19% jump from this time last year and above pre-pandemic levels.
The surge has been driven by a string of jumbo sales, often by corporate and government shareholders looking to take advantage of higher stock prices.
These included a $2.7 billion selldown by Germany out of Deutsche Telekom AG and multi-billion-dollar placings of Haleon Plc shares by Pfizer Inc. and GSK Plc.
Buyout and venture capital groups have started to shed stakes left over from initial public offerings, with much public stock still sitting in their funds.
“The European secondary market has been quite solid, and we see no reason for that to change,” said Alex Breese, equity capital markets manager at Schroders Plc, which oversees almost $1 trillion in investments. While noting that the supply of larger blocks could slow down in the remainder of the year outside of government privatizations, Breese expects more to come from private equity.
This year there have been at least 24 sales led by private equity raising almost $9 billion combined on European exchanges, according to data compiled by Bloomberg.
Some of these have come out of recent IPOs that have performed well in the after-market, including two consecutive selldowns by Apollo Global Management Inc in Lottomatica Group Spa and a $272 million sale of Renk Group AG shares by Triton Partners.
Others, however, were longer-held positions.
Apax Partners Holdings, for example, has sold shares in Baltic Classifieds Group Plc multiple times this year after listing the business in the boom days of 2021. The stock has bounced back from an early 2022 plunge and is now well above its IPO price.
Meanwhile, private equity shareholders of greeting cards firm Moonpig Group Plc sold a stake in the group this summer, even though the stock continues to trade stubbornly below its 2021 IPO. EQT AB also sold shares in Belgian chemical distribution company Azelis Group NV at a steep discount to its 2021 float.
Private equity has been stepping up exits in an bid to return capital after a couple of years of limited activity amid higher interest rates. Public markets have been one such route, both with existing share sales and IPOs.
For those reluctant to take the risk of investing in an IPO, block trades could be an attractive investment down the line.
“We’ve participated in a lot of the stock placings or block trades this year because you get a discount, and you know the company already,” said Michael Gierse, an equities portfolio manager at Union Investment, which manages €479 billion ($531 billion) in assets.
“And there are still a lot in the pipeline, including private equity holdings from the IPO class of 2021.”
--With assistance from Somya Jain.
©2024 Bloomberg L.P.
