Europe, Middle East and Africa saw 271 initial public offerings ( IPOs ) raise more than US$74 billion in the first nine months of this year, according to Refinitiv. That’s way above anything seen since before the global financial crisis. So why does the market feel so challenging?

Let me ask the question in another way: what does the following group of companies, broadly diversifed by sector and country, have in common ( apologies in advance for the rather long list )?

German language-learning app Babbel Group; Marley Group ( the UK manufacturer and supplier of pitched roof systems ); Chronext ( the Swiss digital platform for buying and selling new, pre-owned and vintage luxury watches ); UK investment group Blackfinch Group’s Renewable European Income Trust; UK-incorporated Responsible Housing REIT; French healthcare real estate investor Icade Santé; Occlutech, the Swiss provider of minimally invasive cardiac devices; Dutch energy supplier Scholt Energy, and Coolblue ( the Dutch e-commerce platform ).

Answer? They’ve all opted to ( or have been forced to ) pull their IPOs in recent weeks ( and I’m sure I’ve missed some cancellations in my list ). Taking the pulse of the market today shows that the patient is in a rather brittle state. Sentiment has weakened in a relatively short space of time and rather than a blistering pace to Christmas, if anything the wheels of the European IPO market look rather rickety.

Equity capital markets professionals doubt the rot has ended and are predicting more cancellations as IPO hopefuls push flotations into 2022. A range of macroeconomic and sector-based factors is being blamed for the poor showing, from supply-chain disruptions to inflation to stuttering consumer spending to labour shortages, on top of lasting Covid impacts.

Market factors are also to blame, from the oft-cited growth-to-value rotation, to market volatility, rising bond yields, doubtful prospects for reasonable returns, and the risks of stocks tanking in the aftermarket. They’re all leading to a much more cautious tone. No doubt the accelerated deal flow year-to-date has played a role in engendering a sense of fatigue.

Talking of performance, I suspect a bunch of investors that bought stock in companies that did get over the line and price their IPOs may be wishing those companies had waited too as they’ve all traded flat to below to well below their IPO prices. The list includes a trio of Swedish companies ( Netel, Byggfakta Group and Nordisk Bergteknik ); Petershill Partners; Eurowag, and Majorel. I’ll leave it to you to Google what they do; suffice to say it’s a motley group of companies from different industry sectors and countries.

This is not what is supposed to happen in IPOs. The risk that comes with the current woes is that cancellations tend to beget cancellations as investors pull in their horns and grow extremely selective and price-sensitive, preferring to sit on their hands unless a must-have comes along – and there have in fairness been some of those too.

In the circumstances, it’s perhaps no surprise that company founders, venture capital, private equity, and institutional pre-IPO money is going for the ‘discretion is the better part of valour’ approach to life and waiting for better times.

As a market commentator, it’s easy for me to write this all off by stating glibly that we’re in an IPO lean patch and that rosier times will return. And that’s undoubtedly true. Underwriters, too, take this approach, factoring out the significance of deals that don’t make it to market on the basis that at portfolio level, the proportion of mandated transactions that fails to make it will always be relatively small. Ditto private equity and venture capital sellers.

But there has to be more to this story than that. On this point, I was taken by a short video posted on social media by Julian Macedo, former ECM banker and founder of The Deal Team, a consultancy offering companies contemplating IPOs and major events dedicated transaction management support.

What it made clear is that for every IPO cancellation, there’s a corporate back story. Talking about the months or even years of effort it’s taken management to get the company ready to IPO, soaking up all spare executive capacity, Macedo talks about how a private equity investor broke down the analysis of a failed exit process.

It goes like this: six months of live deal execution during which the company’s EBITDA tracks below budget before the IPO is put on hold. Taking rectifying actions to bring the business run-rate back to budget after the postponement: another six months. To get the business fully back on track: another 18 months.

That’s two years of lost momentum after a deal initially gets pulled, Macedo noted; or two and a half years of disruption no doubt combined with bouts of management exhaustion spent trying to juggle managing the business with trying valiantly ( and in such cases ultimately failing ) to keep the deal juggernaut on the road. Of course, deals invariably get pulled for reasons beyond management’s control, which has got to be as frustrating as hell.

Multiply the time factor by the number of IPO cancellations – and there was also a bunch in the first half of the year on top of the most recent ones – and that’s a ton of lost time and endeavour that management and employees will never get back. Sobering thoughts.