CAB Payments targets £850mn valuation in rare bright spot for European IPOs

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Fintech group CAB Payments said it was targeting an £850mn valuation in one of London’s biggest initial public offerings so far this year, in a rare sign of life for Europe’s moribund market for listings.

The announcement on Tuesday came as shares in Italian luxury yachtmaker Ferretti rose 2 per cent on their first day of trading in Milan, after its share sale raised €265mn, according to exchange operator Euronext.

It has been a largely dismal year for European IPOs, with London in particular suffering. Chipmaker Arm rejected appeals by the government to list in the UK and building materials group CRH opted to switch its listing to New York. Soda ash producer WE Soda earlier this month blamed “extreme investor caution in London” for cancelling its planned IPO. Bankers said investors had asked for too steep a discount, while investors claimed the company’s valuation expectations were far too high from the start.

However, the decision by CAB and Ferretti to come to market suggests that despite high interest rates, stubborn inflation and the lure of deeper pools of capital in the US, at least some investors can still be tempted to bet on fresh European listings.

“The positive spin is that you have to start somewhere,” said Roger Lee, head of UK equity strategy at Investec, referring to CAB’s planned offering.

“[But] clearly, it would have been a lot nicer to really open up the IPO market with Arm,” Lee added.

Excluding listings for blank cheque vehicles, CAB, which is seeking to raise roughly £340mn in a secondary sale, will be London’s biggest IPO of the year, beating offerings by property developer DarGlobal and emerging markets-focused investment trust Ashoka WhiteOak. Just eight companies have listed on the UK’s main market so far in 2023, raising a combined £539mn, data from the London Stock Exchange shows.

Announcing the company’s plan to offer at £3.35 per share, CAB’s chief executive Bhairav Trivedi said: “We have been pleased with the investor engagement so far and are excited to continue to meet the institutional and retail investment community over the next week.”

“Normally there would be a price range, but [CAB] has polled institutions over recent weeks to understand what demand looks like at certain valuation points,” said a person close to the situation. “They have consensus from a good solid core of investors around a value point, and they’re confident of that, so they’ve taken the price range off the table.”

Two investment bankers not involved in CAB’s offering said it was unusual to do a fixed-priced deal, though one of them suggested it implied “some notable and or sizeable high quality demand”. The IPO “will work and it could even be a success, but it’s a weird one and it will probably lose liquidity fast”, said the other. “Europe needs different kinds of companies to IPO.”

CAB’s offer will consist of a secondary selldown of existing ordinary shares by a subsidiary of Helios Investors III, a fund run by private equity group Helios Investment Partners. HIP partly underwrote a 2019 London IPO for Africa-focused telecoms towers company Helios Towers, whose shares have since fallen 27 per cent.

Ferretti — which floated in Hong Kong in 2022 and whose additional offering on Tuesday was the ninth listing on Euronext Milan this year — boasted a market capitalisation at admission of about €1bn.

Even so, Europe’s IPO market faces several of the same challenges, including limited liquidity and a dearth of long-only capital, confronting the UK.

Frankfurt-listed Ionos and Italy’s Lottomatica, two of the continent’s biggest recent offerings, have fallen 21 per cent and 0.3 per cent respectively since listing earlier this year. EuroGroup Laminations, in contrast, has pushed 18 per cent higher since going public in Italy in February.