(Bloomberg) -- Profitability still matters when it comes to initial public offerings in Europe, even for tech startups, according to Bank of America Corp.

“Regarding IPOs of pre-break-even tech companies, we are not quite there yet,” said Jerome Renard, head of EU ECM at BofA. 

Despite a tentative rebound in European IPOs in 2024, tech companies have been unable to raise money on Europe’s exchanges in two years. The most recent significant IPO in the sector was Technoprobe S.p.A., which raised more than $800 million in early 2022.

French software firm Planisware SAS postponed its listing on Euronext Paris in October amid challenging market conditions, even though it is now generating profit, according to its latest earnings update. Doctolib SAS, which operates an app to book medical appointments and aims to break even in early 2025, is considering a listing but not any time soon. 

“One will have to wait for several interest rate decreases in Europe and for more sustained primary market activity globally before that segment reopens,” BofA’s Renard said.

That’s in stark contrast with the US, where the loss-making social media company Reddit Inc. raised $860 million last month, touting its vision of profiting from the growth of artificial intelligence. Semiconductor connectivity company Astera Labs Inc. raised $820 million earlier in March, while Rubrik Inc., a cloud and data security startup backed by Microsoft Corp., filed for an IPO despite disclosing an annual loss of $354 million.

Reddit revealed a 2023 net loss of $90.8 million in its IPO filing but that did not prevent the stock from trading as high as double its IPO price of $34/share. Donald Trump’s social-media business Trump Media & Technology Group Corp. soared after debuting last week, though it slumped on Tuesday after it disclosed a more than $58 million loss in 2023.

Karen Kharmandarian, senior equity investment manager at Thematics Asset Management says there’s still some upside left to skyrocketing AI stocks such as Nvidia Corp., but that’s due to the fact they have a record of profitability.

“In terms of sentiment, we’re steady but we don’t yet want to get into riskier strategies such as in non-profitable tech,” Kharmandarian said. 

READ: Klarna Weighing US IPO Shows Europe Continuing to Lag: ECM Watch

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