Long-term performance of US vs European IPOs
We are meeting an increasing number of European founders who ask whether they should list in the US rather than in Europe.
The US market can appear more compelling when it comes to executing an IPO. There is certainly greater attention and more positive publicity associated with a US listing $$.
As a global investor, Amundsen invests in both US and European IPOs, so we tend to be agnostic about listing location.
However, US and European IPOs can display very different trading patterns in the days and weeks following listing.
Below, we illustrate the average performance of IPOs over the past two years (offer sizes above USD 50m): 58 IPOs in Europe and 152 IPOs in the US. The average size of European IPOs was USD 460m, compared with USD 427m for US IPOs (yes - IPOs are larger in EU than in the US on average).
We observe that the Day 1 / Week 1 “IPO pop” is, on average, very strong in the US—roughly three times that observed in Europe. In these circumstances, it is no surprise that (1) IPO allocations are extremely competitive and (2) we often hear sellers complain about mispricing and “free lunches” being given to IPO investors.
Looking beyond the initial “pop,” the picture is quite different. The data shows that US IPOs tend to underperform on average over time. Most of the “alpha” is generated at the time of the initial IPO allocation. Perhaps the IPO was not underpriced after all.
European IPOs may look less “hot” at pricing and are typically less chased in the aftermarket. However, their average performance tends to be better over time, with investment duration contributing meaningfully to returns.
In the end, selection matters most for us as investors. Listing location does not. For founders and issuers, we advise listing where it makes the most strategic and business sense. Achievable IPO size (market capacity) and post-IPO performance (investor engagement and support post listing) can be equally strong in both regions.
An IPO is the only moment when a company and its owners can choose their public shareholders and set the stage for aftermarket performance. It should be used wisely.
