Neither sharp hikes in interest rates nor regulatory changes aimed at easing market entry have compelled companies to begin trading on Spain’s permanent stock market. The last initial public offering (IPO) occurred in July 2022, and the market anticipates a reversal in 2024. The chatter is loud with names like Puig, Volotea, Astara, Cosentino, and Europastry, yet the first quarter closed without a single group taking the leap. Rodrigo Buenaventura, head of the National Securities Market Commission (CNMV), voiced concern over the quiet debut scene in early March. “Some Catalan and Spanish firms appear ready to move forward; it would be beneficial if this happened soon, but it would be unwise to count on spring alone. Medium and long-term work is essential,” he said during the Finance Summit Day in Barcelona.
Industry experts interviewed by Assets emphasize that the process of going public is intricate, heavily regulated, and requires full disclosure of all financial information to investors. “Many business owners become reluctant to expose so much detail for the markets,” explains Javier Méndez, secretary general of the Spanish Institute of Analysts. He notes that the geopolitical environment remains uncertain and that 2024 might finally end the “stock market drought,” though ongoing conflicts in Ukraine and other global tensions persist, according to Manuel Romero, head of the Finance Sector at the Instituto de Empresa. The Ibercaja group even postponed its IPO several times in response to these challenges.
Despite the hurdles, BME, the market operator in Spain, maintains that going public serves as a showcase for attracting talent and professionalizing corporate governance. Alejandro Fernández de Araoz, a business consultant lawyer at Araoz & Rueda, argues that accessing a broader pool of investors can fuel growth and job creation.
Current rate levels sit at their highest in twenty years. Yet it’s important to remember that money was near zero just a few years ago. Many firms did not pursue private equity as a financing option and instead relied on traditional banking or other private sources. BME sources suggest that diversifying financing has not been seen as urgent for a long period, reflecting a global trend where IPO activity has cooled in Europe, the United States, China, and Japan. Industry observers highlight that this cooling has been accompanied by slower publishing in the field.
The recent years’ instability has tempered the willingness of firms to go public. The pandemic reshaped plans, with some companies needing to reorganize under different governance required by academic-style scrutiny, a process that can stretch over a year, according to Pablo García, a finance professor at CUNEF University. He also points out that geopolitical uncertainty and subdued growth expectations dampen appetite for market entry, though a few companies remain poised to emerge.
ECB’s rate increases are seen as an incentive for some to consider the public markets as an alternative financing channel. García notes that higher rates and the associated cost of capital have drawn attention to IPOs, particularly after a strong American year for listings in September. He adds that war, regional instability, and domestic political concerns further temper enthusiasm, leading to cautious timing on market debuts.
The role of monetary policy
In Spain, the impact of higher rates on the stock market has not yet fully materialized. Rosa María Orozco, EY Spain’s Capital Markets partner, explains that higher rates demand stronger future growth signals backed by solid fundamentals and historical performance. A higher currency value also reduces potential valuation when selling equity stakes. “Companies contemplating a public exit recognize that profits could be discounted at a higher rate, making this perhaps the least favorable moment for monetizing a business,” states Javier Méndez of the Spanish Analysts Institute.
Benito Berceruelo, president of the Spanish Investors’ Day forum, notes that the IPO drought in recent years may have frightened some firms away due to rising financing costs. At the latest ECB policy meeting, the possibility of a rate cut in March was ruled out, though markets anticipate reductions around June. “If inflation remains moderate and rate cuts occur in 2024, macro conditions could support investor interest in IPOs,” says Rosa María Orozco of EY Spain.
The lack of competition could also be a factor. The European trend shows more European companies listing in the United Kingdom or the United States, a dynamic Brussels monitors closely as it fears a decline in European market competitiveness. CNMV President Rodrigo Buenaventura underscored the need for capital markets to complement bank financing and serve as a financing channel for European firms. In November, the Council of Ministers approved four decrees to advance a reform that would boost market competitiveness. These texts transpose several EU directives.
In related measures, Brussels is pursuing a listing law to reduce the minimum share capital required to list from 25 percent to 10 percent in the EU. The aim is to simplify the listing process, especially for small and medium-sized enterprises (SMEs). A final green light is expected before the next European elections. Alejandro Fernández de Araoz explains that this initiative targets reducing the costs and complexity associated with listing, encouraging more EU companies to access public capital markets. The European Commission is also considering the Debra directive to align tax deductions for bank financing with those for capital gains, addressing residual fiscal biases across euro zone countries. The objective is to harmonize incentives and make public funding more appealing for businesses across the Union, particularly SMEs.