European stock exchanges, led by London, showed some signs of recovery in Initial Public Offering (IPO) activity during the third quarter of this year, but concerns over economic growth and pricing issues continued to restrict the number of larger deals, according to the latest IPO Watch Europe, the PwC survey tracking the volume and value of IPOs around Europe.

In Europe as a whole there were 85 IPOs raising €2,474m, which was more or less double the value (€1,375m) recorded in the same quarter last year but less than a third of the value (€9,014m) of the 89 IPOs that got away in the second quarter of this year. By way of comparison the US exchanges NASDAQ and NYSE together recorded a total offering value of €3,762m from 32 IPOs in the third quarter, similar to the values seen in Q2 of this year and Q3 of 2009.

London led Europe with 18 IPOs with an offering value of €1,657m, accounting for 67 percent of total money raised. This figure was a significant increase on the six IPOs that raised just €449m in the same quarter of 2009. It was, however, well down on the 27 IPOs that raised €3,202m in the second quarter of this year although across all European markets the July-September quarter tends to be the quietest period of the year for IPOs.

London had three of the five largest IPOs this quarter – the largest Vallar, an investment company, which raised €822m, retailer Ocado Group (€256m) and investment company JP Morgan Global Emerging Markets Income Trust (€239m).

The next largest market by value was the Deutsche Börse which saw four listings raise €377m compared to no money raised during the third quarter of 2009 and just €5m in the second quarter of this year. Germany had the second largest European IPO in the quarter – Strör Out-of-Home Media AG, a media company, which raised €358m.

Luxembourg was in third place by value (12 IPOs raising €301m), including the fifth largest in Europe – Sino-American Silicon Products which raised €135m. It was followed by the Warsaw Stock Exchange (32, €55m) and NYSE Euronext (nine, €35m).The offering values of IPOs on the remaining exchanges amounted to less than €10m in total.

Richard Weaver, partner, capital markets group, PwC, said:

“The recovery in the IPO market which we correctly predicted would start in the second quarter of this year has clearly faltered, albeit that the July to September period is traditionally a quiet one for listings. Some IPOs are still getting away and there is no shortage of buyers in the market at the right price, but stock market volatility and the poor performance of some recent IPOs is acting as a dampener. Also with the return on equities still quite low, some companies are turning to high yield bonds for their funding, which provide particularly attractive returns to investors in the current environment.”

Tom Troubridge, head of the capital markets group, PwC, said:

“With the economic uncertainties still hanging over the eurozone and amid worries, especially in the UK, about the potential for a double dip recession, the outlook for Europe’s IPO markets remains uncertain. These economic uncertainties are less apparent in the emerging markets, in particular China, where the outlook for IPOs in both Hong Kong and China are very positive.

“Although there are some grounds for optimism in Europe for the fourth quarter and into 2011 as a number of larger deals are in progress across the European exchanges, there is unlikely to be a sustained recovery in IPO markets until investors are more confident of the economic outlook.”