Among the hottest financial news of the year has been the upcoming stock market debut of Anthropic, an artificial intelligence leader. Market volatility makes it hard to predict the outcome, but the ambition is sky-high, with a valuation around $1.3 trillion.

Despite its extraordinary scale, such a blockbuster listing has become almost routine on American stock markets. Europe, meanwhile, has produced no comparable deals. At a time when Europe is vying to grow its capabilities in strategic technologies like AI, quantum, and space for both its competitiveness and security, it must fix its initial public offering (IPO) and broader equity market problem. This isn’t a new issue; many researchers besides us have studied it over the years, but we believe action is now urgent.

Europe’s lackluster IPO performance is not due to a lack of innovative companies. In fact, many of Europe’s most promising firms, such as Arm and Klarna, have helped fuel the success of American equity markets by choosing to list on stock exchanges there. Indeed, around one-third of EU scaleups go to the US for an IPO. 

Why the problem?

One driver is the prospect of higher valuations overseas. Companies listed in the US reach average valuations more than three times higher than their European counterparts. Due to this and other market factors, the number of new companies listing in Europe is well behind that of the US. The value of these listings has also dropped sharply over the last decade. EU stock exchanges accounted for only 8% of global IPO volumes in 2025, down from 32% in 2015.

Europe’s weaker stock markets stifle its capacity to foster companies in strategic sectors. Instead, these companies must rely on bank lending. But banks tend to shy away from the risks involved in funding innovation. Equity financing is much better suited to that task, and public equity markets play a key role: listed firms can tap into a broader capital pool to develop new products. In fact, publicly listed firms invest about 50% more in R&D compared to their privately held counterparts. Stock markets also offer early investors a viable route to “exit” and cash out, encouraging the type of later-stage venture capital (VC) and private equity investment that Europe sorely needs to scale up its firms. While more tech startups are founded here than in the US, Europe produces 80% fewer scaleups and 85% fewer unicorns.

Better access to equity financing matters for competitiveness and sovereignty.  Even when European startups manage to grow, they often become reliant on US venture capital. Non-European investors provide 22% of capital provided in seed rounds, but 50% in scale-up funding rounds. So foreign capital fills a crucial gap. But it can also create dependencies, as investors can pull companies, jobs, and intellectual property abroad. So while Europe should welcome foreign capital, it must have a strong enough domestic ecosystem to provide a viable alternative as its best and brightest firms grow. In this context, healthy public markets matter because workable exit opportunities encourage VC investment: Empirical research shows that in a cross-country comparison, IPOs are a significant determinant of later-stage VC investment.

Time to act

If nothing changes, European equity markets will remain stuck in a vicious cycle: as the EU’s most promising companies list in the US, European public equity markets become less attractive for investors. This worsens access to capital for firms already listed on domestic exchanges and creates tougher financing prospects for startups that cannot pursue an IPO abroad. 

So, how to get out of it? Many of the challenges for European public equity markets are not new. For instance, the market is highly fragmented, with over 30 exchanges splitting up liquidity. Moreover, too much of Europe’s €10 trillion in household savings sits in deposits instead of being invested in markets.  

Additionally, stock markets today are increasingly working best for very large companies. As more countries shift to capital market-based pension systems, institutional investors have a growing sum to deploy. These investors are vital sources of capital, but their size makes smaller companies a less attractive investment target: investing meaningful amounts in them is often impractical. The rise of passive investment reinforces this trend, channeling capital towards the very large companies included in indices like the S&P 500. Since high-profile listings on a stock exchange attract liquidity and vice versa, this leads to a virtuous cycle for some stock exchanges.

Meanwhile, our analysis shows that firms that do list in Europe are very small. From 2014 to 2025, 72% of European companies listing on an exchange issued shares with a value below €100 million, compared with 49% in the US. And only 12% achieved a market capitalisation of at least €1 billion at the time of their IPO, compared with 29% in the US. In other words, Europe has a scale-up problem that becomes visible on the stock exchange. In this context, relying on shortcuts like lowering listing requirements is not sufficient. 

Our prescription

Fixing European equity markets therefore requires a comprehensive strategy. 

First, national policy-makers should implement pension reforms and incentivise greater retail investment to shift more household wealth into equities. While pension funds favour bigger companies, creating more attractive equity markets is impossible without more market depth, meaning more capital in a particular market. Deeper capital pools would improve liquidity and valuations. However, this is not enough. Sweden successfully reformed its pension system and created a thriving IPO environment. Still, as a national market, it is too small to be attractive for more prominent companies, including homegrown champion Spotify – which instead went to New York to list in 2018. 

Second, for EU stock markets to function as one liquid market, leaders at EU level should reduce national fragmentation in securities law, taxation, and clearing and settlement. Currently, diverging requirements and procedures increase complexity, discouraging cross-border trading. Policy-makers should also consider a new pan-European growth market segment for promising, young companies. 

Finally, both EU and national lawmakers should ensure that there are more high-growth firms ready to list in Europe in the first place. That means completing the single market to help companies expand across borders, not least through initiatives such as the EU Inc. proposal, to let companies incorporate at the European level to serve the whole EU market and not get bogged down in small national markets. 

Europe has taken steps in each of these areas, but progress remains too slow. The continent does not need trillion-dollar listings or, frothy speculative AI stocks. However, it does need capital markets capable of financing innovative firms as they grow – and offering investors viable exit routes to cash out.  Without them, Europe will struggle to develop the critical technologies it needs for its competitiveness and security.  The task is to complete the circle – from founding, to scaling, to listing, and using the proceeds to fund the next generation.

 

This policy position was co-authored by Claudia-Dominique Geiser, Senior Expert for EU economic policy at the Bertelsmann Foundation, James Green, Research Fellow at the Centre for European Reform, and Marlene Schörner, Policy Fellow for EU financial markets at the Jacques Delors Centre. It was first published on 12 November 2026 as an op-ed in Science|Business.

 

Photo: Aisha M on Unsplash