European tech companies continue to "leak out": $1.4 trillion in market value lost over 10 years

Ask AI · Why is it difficult for Europe’s capital markets to retain homegrown tech companies?

Caixin/Finance3 (March 25) News Desk (edited by Niu Zhanlin) A new study shows that over the past decade, European technology companies have collectively lost a total market value of as much as 1.2 trillion euros (about 1.4 trillion U.S. dollars) through overseas listings or acquisitions by foreign companies.

The study was jointly conducted by Swedish private equity firm EQT AB and consulting firm McKinsey. The research finds that between 2014 and 2025, the total scale of European tech companies being acquired by non-European enterprises and pursuing initial public offerings (IPOs) overseas was about 700 billion euros. As of this January, the overall market value of these companies has surged to roughly 1.2 trillion euros.

The study highlights a problem that is increasingly drawing attention from European policymakers and capital-markets experts: “European homegrown champion” companies—including chip design firm Arm and music streaming platform Spotify—are turning to the U.S. market one after another in order to obtain deeper capital support.

Victor Englesson, head of EQT’s tech business, said that this “outflow” has multiple impacts on the European economy. “It not only means fewer job opportunities, but also involves losses that are harder to quantify—for example, a weakening of homegrown technological know-how and the loss of future entrepreneurs.

Englesson claims, “When a European company chooses to list in the United States, its development focus tends to shift—and it is usually permanent. The listing venue appears to be a financial decision, but at its core it is a choice about the soil in which the company will grow in the future.”

In fact, countries across Europe have already been aware of this issue. Market observers and local officials have also repeatedly emphasized the urgency of reforming Europe’s capital markets.

In January this year, International Monetary Fund managing director Georgieva called on European leaders to accelerate efforts to build a capital markets union, strengthen the energy union, lower cross-border labor mobility barriers, and increase investment in research and innovation.

Nicolai Tangen, CEO of the Norwegian bank’s investment management company (NBIM), recently warned that Europe “must act as soon as possible” on capital-market integration. “On capital markets, we really do need to get our act together—the winners take all. Capital always flows to the markets with the strongest liquidity and the highest valuations, so addressing this is crucial.”

Europe’s capital markets urgently need to integrate

However, EQT itself has also previously sold some technology assets or arranged overseas listings. Last year, the company sold AI startup Sana to U.S. Workday for $1.1 billion. In addition, according to reports, EQT is also considering arranging for network insurance company CFC to list in New York.

Bjørn Sibbern, CEO of SIX Group, which operates the Swiss stock exchange, said: “One thing the U.S. does right is that it views capital markets as a core channel for corporate financing, while Europe is lacking in this regard. In comparison, the U.S. has done better, and Europe needs to catch up.”

To reverse this trend, the European Union is preparing to set up a €5 billion “European Scale Fund,” focusing on the development of quantum computing, artificial intelligence, and other deep-tech fields.

Laura Fruehauf, a global transactions lawyer at law firm Freshfields, said: “For Europe, it is still crucial to continuously mobilize more capital into the domestic market to ensure competitiveness with our peers in the U.S. Especially in defense, artificial intelligence, and more broadly across deep-tech fields, the identity of ‘European champions’ itself may also become an advantage over international competitors.”

However, there are also signs that the attractiveness of the U.S. market is weakening. For example, payment company SumUp is considering listing on European exchanges; it had previously planned a U.S. IPO. Crypto broker Bitpanda has already chosen Frankfurt as a potential listing venue.

In addition, if European companies want to enter the benchmark index system, they usually need to reach a certain scale. And if they list in New York, their U.S. operations also must be large enough to attract local investors’ attention; otherwise, they are likely to end up as ignored “edge stocks.”

Sibbern noted: “Many European companies listed in the U.S. do not necessarily perform well—whether it’s share-price performance or market attention. If their performance isn’t outstanding, it’s easy to get ‘swallowed up’ in a massive market.”

(Caixin Finance · Niu Zhanlin)