Relative to the rest of Europe, the Nordic countries account for a rather small share of population and GDP, yet in recent years they have represented a significant share of Europe’s IPOs. This year alone we have seen a continued Nordic boom of IPOs with just under half of the European IPOs coming from Denmark, Finland, Norway, and Sweden. With 82 Nordic IPOs year to date, the number has already surpassed 2019 (68) and the 10-year average (76). The Nordics’ stable economies and transparent financial markets continue to be favorable factors during uncertain market conditions.
In this analysis we are looking at the count of IPOs and grouping them by their announcement dates. The chart below shows the Nordic share of European IPOs over the last 10 years. We can see that around one-third of all European IPOs since 2014 have been Nordic, a clear trend over the past seven years.
Historically Sweden has been the main driver of Nordic IPOs, with Stockholm being one of the cities with the highest number of IPOs in Europe over the last couple of years. However, this year we have seen a large increase in Norwegian IPOs; with its 42 IPOs year to date, the country is well above the 10-year average of 13 per year. The growth-focused Norwegian marketplace, Merkur Market, an unregulated multilateral trading facility that will soon be rebranded as a “Euronext Growth Market,” has seen a large uptick of IPOs this year. Merkur has become an attractive place for listings, especially during this new virtual environment with its easy, cost-efficient, and fast listing process.
Looking at the quarter-by-quarter comparison, it is clear that the momentum in the Nordic region changed after the summer. To no one’s surprise, the Q2 figures were well-below the 10-year average due to the pandemic, but the recovery has been quite remarkable. This is contrary to what we are seeing for the rest of Europe, where every quarter this year has been below the 10-year average in terms of IPO volume. Q3 has historically been the quietest quarter for listings in the Nordics, but this year activity picked up as virtual roadshows got up and running. Nordic companies’ technological sophistication and ability to adopt digitalization have benefited them this year and have helped spur this quick turnaround in IPO activity compared to the rest of Europe.
We have already mentioned the beneficial market environment and technological strength as factors for the high Nordic listing activity this year. Another important factor is the dominance of Nordic companies in technology-related sectors. While the rest of Europe has seen a large number of listings in the financial sector, the Nordic region had a third of its listings in the Health Technology and Technology Services sectors. These sectors have also been the main drivers of 2020 IPOs, and Nordics alone got more listings than the rest of Europe combined, year to date. On top of the 10 Nordic Health IPOs on the Nordic exchanges this year, there have also been three Nordic companies listed in the U.S. The EV/EBITDA LTM valuation of the U.S. Health Technology sector is currently 36% higher than that of the Nordics, which can help us explain why Nordic-based firms would prefer to list in the U.S.
Looking at the different IPO types and performance, we see that historically the return in Nordics has been higher than the rest of Europe within the first three months of trading following an IPO. Interestingly, the Nordic market has seen close to 30% of its listings coming from Private Equity and Venture Capital backed companies, while in the rest of Europe the share is just 18%. The cornerstone, anchor, and early committed retail investments raise the profile and credibility of transactions, thereby increasing the probability of a successful IPO.
Transparent markets and a focus on technology have played a large role in fueling the quick turnaround in Nordics taking companies public this year. The investor environment should also be mentioned as a key factor, as we see a high degree of early commitments from investors in the Nordic region.
It will be interesting to see if the rest of Europe follows the lead of the Nordics in the upcoming year as things move closer to normal. Will the rest of Europe try and catch up with the successful recipe from the Nordics and push more deals through as we step into 2021 or will the Nordic region keep its advantage in this part of the public markets?
Note: All statistics are based on FactSet data for IPOs priced and grouped by their announcement dates. Data for previous quarters/years has been revised based on updated information, so values cited here may not match previous publications.
Sebastian Segerstrom also contributed to this article.