Why U.S. and Asia IPOs are outshining Europe’s muted market
When Sweden’s Klarna , one of Europe’s most valuable fintech companies, laid the groundwork for its blockbuster initial public offering, it looked past the exchanges in Europe and set its sights on New York. Klarna’s move is symbolic of the divergence seen in public listings, where a booming United States and Asia are leaving fragmented Europe behind. So far this year, initial public offerings in North America have raised $17.7 billion across 153 deals, while Europe has managed just $5.5 billion from 57 listings, according to data from FactSet. The divergence is also a global phenomenon. “Asia has been incredibly active this year and been a real driver of strength and leadership for us,” said Tommy Rueger, global co-head of Equity Capital Markets (ECM) at UBS. “There are real pockets of strength in Europe, and we expect activity to accelerate through the balance of this year and in 2026, but year to date, North American and APAC new issue activity is leading the way.” That sentiment is echoed by Kevin Foley, JP Morgan’s global head of Capital Markets, who projects a strong pipeline of over 30 deals in the U.S. before the year is out, while describing the European market as “muted.” Why has Europe fallen behind? The health of Europe’s IPO market has been a source of concern for the region’s exchanges, investment banks, advisors, financial press, as well as executives at companies considering an entry into public markets. One major source of frustration is the sheer length and unpredictability of the path to a public listing in volatile markets. “The IPO process is quite long, and during that process you can have market risk,” said Jonathan Murray, co-head of ECM for EMEA at Mizuho, speaking from Tokyo, where he was connecting European companies with Asian investors. The process of going public can often take between three and 12 months, depending on how prepared the company is to go public. During that extended period, a deal can be derailed by broad market swings or even a sudden downturn in the stock of a peer company, which can spook investors and alter valuation metrics overnight. This year, for instance, the MSCI France index is up only about 4.5%. Other key European indexes have just recovered since August after falling steeply in the spring. “As the U.S., China [and] Japan make new highs, Europe is stuck in a range amid no AI support and geopolitical concerns,” pointed out Barclays’ equity strategist Emmanuel Cau. For private equity firms, which back a significant share of European companies going public, the certainty of an M & A deal is often far more attractive than risking a public listing that could fail at the last minute, according to Mizuho’s Murray. This is especially true for sponsors who don’t fully exit at the IPO and are therefore highly concerned about how the stock will perform in the aftermarket. However, some bankers believe that a shortage of the right kind of companies ready for public scrutiny may be to blame for the dearth of European IPOs. Markets “continue to be selective” about who can list compared to the frothy days of 2021, according to Luca Erpici, co-head of ECM for EMEA at Jefferies. “I think we are in an orderly market,” Erpici said. “It’s about applying a quality filter to what comes to the market, the bar is still high but we are going to see some large deals in [the fourth quarter] and a strong pipeline is building for 2026 and [2027].” This “quality filter” is a key reason the pipeline of PE-backed IPOs has slowed. Many companies in PE portfolios aren’t suited for the public markets, which demand a “consistency of returns that the public market requires,” according to Erpici. A company that cannot reliably deliver quarter after quarter is better suited for the private market. For instance, one of Europe’s largest PE firms, EQT, bucked the trend with the successful 2024 listing of its skincare company Galderma . Shares have risen more than 125% since the IPO, allowing EQT to sell a further 5.3 billion Swiss francs ($6.6 billion) worth of stock this year and demonstrating that high-quality assets can still thrive. Looking ahead, the number of IPO deals in the pipeline was up 2% globally in the first half of this year, compared to the same time last year, according to dealmaking data room platform Datasite, which indicates deal volumes that could be announced in the next 6-9 months. GALD-CH 1Y line Yet companies and capital are flowing to the U.S. Andrejka Bernatova, a SPAC sponsor who recently took digital assets firm The Ether Machine public in a $2.5 billion deal, said that the U.S. market’s dominance is helped by “depth and liquidity.” “Liquidity is key,” Bernatova stated. “If you don’t have trading liquidity, being public is not as valuable.” Europe, meanwhile, suffers from regulatory fragmentation. While the U.S. has multiple exchanges like the NYSE and Nasdaq, they all operate under a single, seamless regulatory framework overseen by the Securities and Exchange Commission ( SEC). In Europe, a patchwork of national regulators creates complexity and friction, boxing in investors and companies. Bernatova suggested that the capital-intensive industries of the future — such as AI and the energy transition — have no choice but to tap U.S. markets to raise the “tens of billions and hundreds of billions” they need to grow. Jefferies’ Erpici broadly agreed, but said that a strong business like Klarna could have a successful IPO anywhere, including its home market. He said the Swedish company’s New York listing is more about optimization of the outcome in the longer term, rather than being an alternative to something that cannot list in Europe. “The U.S. is not the solution for businesses that cannot be successful in their own country.”
