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Abu Dhabi, UAEMonday 25 June 2018

Italy reaps bumper crop of IPOs

Better than expected economic growth, stabilisation of the country’s banking system as well as companies forecasting higher profits spur rally

The tyre maker Pirelli is the latest Italian company to list on the Milan Stock Exchange in Italy. Massimo Pinca/Reuters
The tyre maker Pirelli is the latest Italian company to list on the Milan Stock Exchange in Italy. Massimo Pinca/Reuters

Initial public offerings are booming in Milan as investor demand for Italian assets is driving company listings to the highest level in at least a decade.

Pirelli’s return to the market on Wednesday makes it the 30th company to join the Italian Stock Exchange this year, with as many as 12 others slated to start trading on the market by the end of the year, said Raffaele Jerusalmi, the chief executive officer of Borsa Italiana.

“2017 will be one of the best years ever for IPOs in Italy, in terms of number of companies that started trading,” said Barbara Lunghi, the head of primary markets at Borsa Italiana. “Companies seeking to list shares in Milan are increasing in a structural way and it looks like we’re at a turning point, with 2018 set to be another strong year.”

The fashion companies Valentino Fashion Group and Furla and Eataly, a supermarket and restaurant chain, may be in the pipeline for 2018.

Italian companies have raised €4.11 billion (Dh17.74bn) from IPOs this year, more than double the €1.45bn in 2016, according to Bloomberg data. European firms have raised about US$39bn from IPOs this year, up from $23bn in the same period last year, according to the data.

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Stefania Godoli, the global head of equity capital markets at UniCredit, cites several reasons for the IPO surge in Italy. They include better than expected economic growth, stabilisation of the country’s banking system as well as companies forecasting higher profits.

"There is a renewed interest from Italian entrepreneurs to get listed as a way to renew the shareholder base and raise capital to expand the business," Ms Godoli said.

Pirelli was Europe’s second-largest IPO this year, after the sale of a stake in Allied Irish Banks in May that raised about €3bn. The Italian tyremaker will end up raising €720 million less than the maximum amount targeted in the IPO, after narrowing the original price range. The stock fell as much as 3.4 per cent in the first day of trading.

Gima, a maker of packaging lines for cigarettes whose clients include Philip Morris International and British American Tobacco, started trading in Milan on Monday, gaining 22 per cent in its first session. The offering, open only to institutional investors, was eight times oversubscribed, an interest that “is comparable in recent years only to Moncler for the level and quality of demand generated”, said Stefano Rangone, Mediobanca’s global head of equity capital markets.

The FTSE MIB benchmark index is currently the best performing large stock exchange in Europe, up 17 per cent year to date. The broader index has also benefited this year from the introduction of so-called PIR investment plans, aimed at boosting inflows into medium-sized and smaller companies by providing tax breaks for investments in funds that hold 70 per cent of their assets in Italian stocks and bonds.