Test tube baby
In 2023, the losses delivered by nearly all European IPOs made for a tiny shortlist for this award, but German specialist glassmaker Schott Pharma would shine in any year.
In a year of crashing disappointments, Schott was rare in listening to feedback on valuation and being grown up about the discount and structure required for success. That made it one of the few to achieve early coverage throughout the range.
"Our team had a very intense dialogue with investors throughout the process where we received granular feedback and were able to create a fan club among global top long-onlys," said Schott Pharma chief financial officer Jens Schulte.
The pitch emphasised the benefits of being part of the Schott group, with vertical integration ensuring a supply of glass tubes, while the all-secondary offer provided funds for the parent to reduce the carbon footprint of its operations.
The company also had attractive growth targets, which it met with a 9% year-on-year increase in both revenues and Ebitda for fiscal 2023, and an Ebitda margin of 26.6%.
Pricing at €27 from a €24.50–€28.50 range made for a €935m IPO, including the greenshoe, and market capitalisation of just over €4bn.
A heavily concentrated book of more than 200 lines meant 75% of stock went to the top 10 orders and a third of orders were not allocated. For once, disappointed investors followed through by buying in the market on debut. The stock finished day one up 15.9% and shares were 24.4% above pricing by year-end.
"We could have priced higher, but pricing meant finding a balance between immediate proceeds and building long-term trust and relationships with investors," said Schulte. "Both the realistic price range as well as the final offering level just above the middle of the range achieved that balance."
Launched with an ambition of 30% free-float, the all-secondary offering from the Carl Zeiss Foundation’s Schott was reduced to 20% (rising to 23% when the greenshoe was exercised after a week) in order to stomach that discount.
Schott also opted at a late stage to include a cornerstone, allocating a 5% stake in the company to Qatar Investment Authority for a €200m investment.
"With a view to derisking while keeping liquidity at a targeted level we decided on a cornerstone tranche six weeks before the IPO. QIA is already well invested in Germany; we met them during deep dives and appreciate their support and long-term orientation," said Schulte.
Schott was one of two European IPOs to complete post-summer (with Sweden's Rusta at US$188m-equivalent the other) and had a notable syndicate led by Bank of America, BNP Paribas and Deutsche Bank, absent the usual US names of a major IPO. Those banks were attached at an early stage having convinced the client the IPO would be given their full attention.
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