America’s AI slowdown brings little comfort to Europe’s markets
A joint new report from three think-tanks, the Centre for European Reform, the Jacques Delors Centre, and the Bertelsmann Stiftung, lays out the parlous state of Europe’s stock markets, which are failing to provide the continent’s most innovative, promising companies with the capital to grow and compete with their US counterparts.
The figures on the transatlantic “innovation gap” are startling. European stock markets are a third the size of America’s, with the chasm growing since 2019. Last year, the number of companies choosing to list in Europe fell to the lowest level since the 2009 financial crisis. The US is now the first choice destination for European firms looking to list, attracting a third of all initial public offerings.
Europe lags on almost every IPO metric. The total stock market capitalisation of the EU represents 55 per cent of the bloc’s total GDP of $23 trillion. In comparison, US-listed firms account for 147 per cent of the size of the US economy of $32 trillion. US-listed firms reach valuations in excess of three times, compared with their European peers — a gap that cannot be explained entirely by differences in profitability, according to the report.
The research finds that European firms — including those listed in the UK, Norway and Switzerland — list at a far smaller size and offer shares in much smaller proportions than their American counterparts. There are both fewer shares for investors to snap up and they are of a lower value when launched. Nearly three-quarters of European firms list with a valuation below €100 million. The US equivalent is less than half. At the lower end, half of all European listings from 2014 have been in the range of €1 million to €25 million, compared with a quarter in the US.
“European stock markets provide too few opportunities for European firms to grow. Europe also produces fewer large, high-growth companies capable of attracting substantial investor interest and capital,” say the authors.