Going Global: Where Did the Stocks Go in Europe?; Size of Markets Had Grown, But Now IPOs Dry Up, Firms Vanish in Takeovers
Paris -- NOT LONG ago, European officials, corporate executives, economists, fund managers and investment bankers had a dream: European companies would be weaned off their penchant for debt financing and rely more on equity for growth. Insurance companies would buy more shares and fewer bonds. Governments would get out of the business of owning whole industries.</br></br>In short, Continental Europe would begin to look a lot like the U.S. and United Kingdom. The process was rather clumsily called "equitization."</br></br>Then came the bear market. IPOs became an endangered species. Many investors abandoned Europe's stock markets. The de-stocking -- de- equitization, in market-speak -- of Europe set in.</br></br>Strategists at Citigroup Smith Barney in London figure that after stripping out market moves, the value of Europe's stock markets (excluding the U.K.) has shrunk by about 0.5% in the past year. In other words, the delisting of stock exceeded the listing of stock, after 20 years when the net new supply of stock increased at an average rate of 8.1% a year.</br></br>"You've never seen anything like this in Europe," says Robert Buckland, the firm's head of pan-European equity strategy. "The creation of equity is hitting a brick wall, big time."