VC investor sees better IPO prospects in Europe
Wed Feb 22, 2006 12:53 PM ET
By Steven Silber
LONDON (Reuters) - The outlook for initial public offerings in Europe's biotech sector is improving as investors on the continent gain the courage to chase a short supply of good firms, a leading venture capitalist said on Wednesday.
Stephen Bunting, managing director at British venture capital group Abingworth, said U.S. markets had become less attractive in part due to the cost of complying with the Sarbanes-Oxley corporate governance law, introduced in the wake of the Enron scandal.
"The interesting thing is that ... Europe will become the better source of capital at some point -- easier to go public than has been the case. We had 21 IPOs in 2005 versus 17 in the U.S.," he said at the Reuters Biotechnology Summit in London.
"In the States, there are so many companies that trying to keep track of their names is hard enough, let alone which one is better than the other. What this means is that if a company goes public (in Europe) then it is easy to get a high profile."
Bunting said investors in Europe were increasingly ready to embrace new ideas and technology as they are in the United States, where firms have had greater access to capital over the past 20 years.
At the same time, London's Alternative Investment Market (AIM) was providing an attractive alternative to Nasdaq while Euronext also offered an effective platform.
Significantly, European biotech firms had performed better in the after market following an IPO than U.S. ones, he added.
"When Devgen (DEVG.BR: Quote, Profile, Research), one of our companies, went public ... everybody said it was impossible to take these companies public on Euronext," Bunting said.
Yet Devgen floated last June at an offer price of 7.50 euros and the stock was trading at 16.50 euros on Wednesday afternoon.
Such appreciation of new issues has been scarce in the United States.
The situation for emerging companies looking to list has been aggravated by the Sarbanes-Oxley Act, which requires executives and auditors to vouch for the adequacy and effectiveness of internal controls each year, he said.
Many European companies have scrapped U.S. listings in the wake of the Act, including British biotech firm Provalis (PRO.L: Quote, Profile, Research) and Germany's Lion Bioscience (LIOG.DE: Quote, Profile, Research), saving around $1 million a year in costs.
Bunting said European investors and companies were finally adopting an entrepreneurial stance "which is more inherent in the American psyche".
"The fact that there has been enthusiasm from those investors is very important and very significant. There are a lot from Holland, from Belgium, from France, from Switzerland, some from Germany," he said.
"It is a European effect, and I tell you it is a changeover from 12 months ago." |
