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Sweden’s IPO Boom

M&A and Corporate Activism

By Sebastian Segerstrom  |  August 21, 2018

Last year, Stockholm, Sweden, saw 115 IPOs take place across its four exchanges, a record number. In fact, Stockholm had the highest number of IPOs of any European city. What makes Stockholm’s markets such an attractive location for European companies to go public?

Looking back over history, only 27 IPOs took place in 2014, and, as of July 16 of this year, 22 have taken place so far in 2018.

Historical number of IPOs in Sweden
*IPOs until 7/16/2018

Stockholm’s Four Exchanges

Before diving into the data, let’s first look at how the Swedish stock market is constructed. The market is divided into four exchanges:

  • OMX Stockholm
  • First North Sweden
  • Spotlight/AktieTorget
  • Nordic MTF

NASDAQ runs OMX Stockholm and First North Sweden while NGM, a subsidiary of Borse Stuttgart, runs the two smaller markets, Spotlight/AktieTorget and Nordic MTF. OMX Stockholm trades most of the blue-chip stocks while the other exchanges contain primarily smaller growth companies, burdening them with fewer regulatory requirements.

During 2017, OMX Stockholm listed 35 new companies, representing 79% of the total proceeds, while First North Sweden had 51 companies listed, accounting for 20% of the total proceeds. These two exchanges alone accounted for 75% of the total number of IPOs and over 98% of the gross proceeds for the year.

On June 21, 2017, the Swedish stock market also broke a European record with five listings in a single day, another sign of the IPO boom that has hit Sweden in the last couple of years. So how does the Swedish stock market and its exchanges compare to its peers across Europe? Let us look at the main exchanges in Europe and the number of companies listed there during 2017:

Top 10 European Exchanges for European IPOs 2017 
Stock Exchange Gross Proceeds (inc. Over-Allotment) % of Total No of Transactions
London Stock Exchance 11,106.35 23.31 52
First North Sweden 522.84 1.10 51
London Alternative 2,606.69 5.47 41
NASDAQ OMX Stockholm 2,060.09 4.32 35
Aktie Torget 33.63 0.07 24
Borsa Italiana SpA 5,970.56 12.53 23
Euronext Paris 3,385.51 7.11 23
Madrid 3,343.48 7.02 19
Oslo Bors 517.26 1.09 11
Frankfurt  1,990.31 4.18 10

Stockholm tops the list with 115 IPOs, ahead of London, England, where 95 companies went public during 2017 (across three separate exchanges). The fact that Stockholm, with 827 public companies compared to London’s 1628, is able to compete, and even beat, London, as well as Frankfurt, Paris, Milan, and Madrid, is quite a feat.  

Since the Stockholm Stock Exchange was founded 1863, it has been regarded as a trustworthy institution and is well respected abroad. With a large number of established international companies listed in Stockholm, the reputation is in high standing. The stock market also benefits from low interest rates (the Swedish Repo rate has been at -0.5% since February 2016) and low volatility.

Swedish bond and index levels

If we look at the size of the companies going public in Stockholm we see that the Swedish stock market has been the destination both for large and small companies searching to leverage the public markets, with listings ranging from just under $1 million to $17 billion in 2017. By going public, the companies are able to increase their visibility as well as credibility towards stakeholders. The ability to raise capital as well as the possibility to gain institutional ownership creates an enticing formula for companies.

Out of the 115 companies that went public in 2017 in Stockholm, 44 were either VC- or PE-backed—another reason behind the large 2017 numbers. With excellent market conditions and a recovery in the markets globally over the last few years, Nordic PE firms have increasingly opted for exits through public listings.

During 2017, there was a large diversity of industries that went public in the Swedish markets rather than targeting exchanges with relevant peers. Historically in the Nordic region, oil companies have targeted Norwegian markets while companies within the health sector have IPO’d in Denmark. 

Breakdown of Top 10 Industries for Swedish IPOs
FactSet Industry Gross Proceeds (Inc. Over-allotment) % of Total No of Transactions
Packaged Software 172.01 6.56 18
Medical Specialites  271.42 10.35 13
Pharma Major 256.22 9.77 12
Misc. Commercial Services 13.85 0.53 7
Information Technology Services 27.53 1.05 6
Real Estate Development 67.96 2.59 6
Biotechnology 42.05 1.60 5
Industrial Machinery  462.63 17.64 5
Electronic Equipment/Instruments 8.11 0.31 3
Engineering & Construction 207.11 7.90 3

So how does this compare to the rest of Europe? European IPOs are similar in terms of industries, with the lion’s share of companies going public in the packaged software, commercial services, real estate, and industrials industries.

BREAKDOWN OF TOP 10 INDUSTRIES FOR European IPOS  ex Sweden   
FactSet Industry Gross Proceeds (Inc. Over-allotment) % of Total No of Transactions
Financial Conglomerates  1,202.12 2.67 27
Misc Commercial Services 1,452.36 3.23 19
Real Estate Development 1,703.84 3.78 16
Packaged Software 1,098.18 2.44 14
Real Estate Investment Trusts 1,735.36 3.85 12
Industrial Machinery 3,295.10 7.32 10
Biotechnology 506.36 1.12 8
Finance/Rental/Leasing 4,309.87 9.57 8
Investment Managers  933.92 2.07 8
Apparel/Footwear Retail 1,685.21 3.74 6

Looking at performance (based on total return from offer price), the best performing stock in Sweden has been NITRO Games, a small mobile game developer and publisher listed on First North Sweden, with a total return of 1,129% since going public. On the other side of the spectrum is Annexin Pharmaceuticals, listed on First North, with a total return of -96% since its public listing in March 2017.

If we look at the slightly larger segment of companies with a market cap of at least $50 million (at offer price), we see that Oncopeptides, a pharmaceutical company listed on OMX Stockholm, has had a total return of 341%. SSM Holding on the other hand, a residential property builder also listed on the OMX Stockholm, has had a negative 74% total return since the company went public.

To further segment our companies, we divided all the listings into three separate baskets based on market cap at offer price: smaller than $20 million, $20-$50 million and $50 million and above.

  • Within the $20 million and below basket, 34% of the companies have had a positive total return
  • Within the $20-$50 million basket, only 21% of the companies have had a positive total return
  • Within the $50 million and above basket, 57% of the companies have had a positive total return

Large Caps Deliver Better ReturnsCompanies with disclosed shares outstanding at the time of IPO and performance through July 16, 2018

This clearly demonstrates the high risk associated with investing in companies that have recently gone public, but also the high returns associated with picking the right companies, with micro- and small-caps being riskier investments than large caps.

During 2017, we also saw several companies from abroad going public in Sweden. Norwegian company 24SevenOffice commented that, “Swedish investors have a clearer focus on technology and growth companies while Norway is mainly focused on oil, gas and shipping.” Finnish company Nitro Games said, “Helsinki and London were considered; however, Stockholm has created a niche position after several gaming companies have gone public on the Swedish exchanges. We have also been receiving a lot of interest from investors locally.”

With another 22 IPOs already listed year-to-date, it appears the IPO boom is continuing in Stockholm. It may not become a record year like 2017, but with companies from Denmark, Norway, and the United Kingdom increasingly considering going public in Sweden, it seems there is a never-ending appetite for new companies to IPO in the Swedish capital. 

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