(BFM Bourse) – The planets seem to be aligned with favorable market conditions and the emergence of French Tech companies. The Parisian market could experience a “super cycle” of introductions over the next few quarters, if the Believe or OVH operations are successful.
After an exceptional 2020 vintage in terms of IPOs on a global scale, but disappointing in France – the worst since 2012 – where only Nacon raised more than 100 million euros, the 2021 vintage promises to be much better on the Parisian market. While they hesitated to push the doors of the Stock Exchange in a particularly turbulent environment in 2020, activity at the start of the year, although still relatively timid, suggests a trend reversal.
They are so far four (Medesis, Pherecydes, HRS and Largo) to have taken their first steps on Euronext Growth) *, with all largely oversubscribed operations (between 3.4 times for the eco-responsible repackaging specialist Largo and 7 , 4 times for Medesis Pharma, bitoech from Montpellier at the origin of a nano-emulsion technology making it possible to administer a medicinal active principle directly to the heart of cells). And others will follow soon, starting with Obiz on May 26th then ekWateur on May 28th).
Above all, and this is an event, OVHCloud and then Believe have in turn announced their IPO project, which makes them the first two candidates of the Next40 FrenchTech label to venture into the market.
Paris does not play in the same court as New York or London
“The year 2021 will inevitably be better than the year 2020 (…) but we must remember that flows on Euronext have been fairly dry for a few years” nuance from the outset Franck Sebag, partner at EY in France. “When we say that the market is picking up again, it’s true, however in the good years we had 4-5 billion euros in funds raised” he recalls, citing the 2015 vintage as an example, where four companies ( Amundi, Spie, Europcar and Elis) had each collected more than one billion euros when they entered the market. “Even in 2019, 3.5 billion euros had been raised thanks to FDJ and Verallia” he notes. The year 2021 will not be of the same barrel warns Franck Sebag, even if he estimates that one “should quickly reach the billion euros if the operations of Believe, Oscaro [Autodis Group] and OVH materialize “.
At this stage, however, only 226 million euros have been raised on the three operations of the first quarter, to which must be added the 22.8 million raised by Largo at the end of April. “It’s another world compared to the United States, or even London” blows the expert, who lists no less than 24 operations, for some 8 billion euros raised (Deliveroo (1.7 billion euros ), DocMartens (1.5 billion), MoonPig (700 million), etc.) on the British market between January and March. Over the same period, 91 IPOs were held in New York, for $ 38 billion raised – not counting the $ 89 billion collectively collected through the 298 SPACs in the first quarter alone on Wall Street.
French Tech companies are getting into the deep end
However, the current dynamic appears to be a source of hope on the Parisian market, where, as a matter of fact, high growth companies with a technological vocation are preparing their introduction. In the space of two months, the French cloud computing nugget OVHcloud then the digital label Believe Digital announced their intention to raise money on the market in 2021. These two groups are members of the Next40 label created by the French government in 2019 to support and promote 40 young companies that it considers “promising and likely to become technological leaders”.
“Fed on private money over the past 5-7 years, the kids are ready for the deep end” image Pierre Kiecolt-Wahl, Equity Capital Market partner at Bryan Garnier. “La FrenchTech [autre label créé par le gouvernement en 2014] begins to bear the fruits of all the investments made, the ecosystem is reaching maturity “also observes Joy Sioufi, partner in the Paris office of the British investment bank GP Bullhound. He certainly recalls that the French ecosystem” is coming back from far “in supporting these startups, both in terms of financial skills and the legal aspect.
According to him, the FrenchTech label has significantly accelerated the movement, thanks to the government’s “efforts to facilitate access to the French market for American investors and the acceleration of French capital with the LateTech label,” composed of 24 funds, including 7 on the listed component, capable of investing 20 to 25 million per investment round, from the start-up phases to the late stages“He explains.” This has enabled companies with a strong maturity to emerge more quickly, or with a strong potential for rapid maturity, “explains the expert, who cites the neo-insurer Alan as an example (valued at 1.4 billion euros during his last round of table at 185 million euros in April).
Another element that shows the maturity of the ecosystem according to Joy Sioufi: the fact that more and more entrepreneurs are in their second or third company. “This is the case for the majority of the Next 40 groups. This makes the capital more efficient and the failure rate lower,” he underlines. Result: “while we had stagnated at 3-4 unicorns for some time, we have between 12 and 13 today, it is still far from the number in the United Kingdom but we are getting closer”.
The introduction of Believe Digital: “a real test for the market”
“The ecosystem is ready, the market is deep, there are all the skills necessary to promote and support these companies” lists Pierre Kiecolt-Wahl. However, it is imperative that the first succeed “otherwise the cycle may be compromised” he says. To do this, it is the responsibility of the banks in charge of operations (Goldman Sachs, Société Générale, Bryan Garnier, etc.) to pricer correctly these companies of a new kind for the French investors.
More than OVH, it is the introduction of Believe that will set the tone for the market because, unlike OVH supported since 2014 by Société Générale, the digital label managed by Denis Ladegaillerie “comes from this French Tech ecosystem and will show that the exit by IPO for companies financed by venture capital can work “predicts Joy Sioufi. The operation will thus constitute “a real test to verify that the market is functioning well” according to Franck Sebag, who adds that “if investors do not respond present, it will be complicated for those after”. On the other hand, if it is a success and the valuation is there, it could distract other companies from the temptation of Wall Street.
Pierre Kiecolt-Wahl is nevertheless relatively confident about the reception that technology companies will receive. “We are very well placed compared to other stock exchanges (Milan, Brussels, Amsterdam or even Frankfurt) where the level of skills on the spot is very poor. Even Germany needs to import capital to support their introductions (between 30 and 50% of the funds provided come from outside), which is not the case in France where we have large dedicated funds (Axa, Arbevel, Amundi) and are therefore less dependent on foreign appetite “.
Towards an IPO “super-cycle”?
“The bet we all take is that Believe and the other French Tech groups will breathe new life into the market, a new reading, in roadshows, etc. to educate the market “hopes Joy Sioufi. If this is the case, it cannot be ruled out that we are witnessing a new” super-cycle of IPOs “on the Parisian market for Pierre Kiecolt-Wahl. The specialist Indeed, in addition to the emergence of French Tech companies, the market points to a combination of elements favorable to IPOs.
“The market never closes but there is always a moment in the economic, political and monetary cycle, when we see the window open very wide,” he explains. “We are in this part of the cycle, which should last two, three years or more, it is a question of portfolio management side buy-side at a time of reflation, even inflation, when big funds are transferring money from bonds to stocks. “To which must be added the” enormous liquidity “poured out by the markets, while” sovereign yields remain negative or very weak and that the real estate market seems less attractive now. ”In short, the planets are lining up for the IPO market.
As long as the first operations are successful, we could therefore be at the dawn of a “super-cycle” worthy of the years 1998 to 2000 (Wanadoo, Orange, EADS, Veolia), then 2005 to 2007 (EFD, GDF , Natixis, etc.), he concludes.
* without counting numerous transfers (Geci, Voluntis, Netgem, Tivoly, Innelec) from the regulated market to Euronext Growth
Quentin Soubranne – ©2021 BFM Bourse
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