Highlight on Swedish IPOs

Why would some European markets show a much better track record than others when it comes to the number of IPOs and their performance?

The two charts below illustrate one of the most extreme difference within Europe: Spain vs. Sweden.

Source: Amundsen IM, Bloomberg.

The charts show the number of IPOs (above $100m in size) since 2010 and their 1-month performance after IPO (to illustrate short-term market dynamism, not long-term fundamentals!).

See the differences?

• Performance: 82% of Swedish IPOs are up in the first month, vs. 53% in Spain — i.e., 8 out of 10 vs. 1 out of 2.

• Number of IPOs: 91 IPOs in Sweden vs. 30 in Spain — ie a factor of 3x.

Not much surprise: if the product works, more can be done.

And this difference cannot be explained by the size of the economies. In fact, Spain’s GDP is 3x larger than Sweden’s ($1.7tr vs. $0.6tr). Germany had 93 IPOs in the same period — as many as Sweden — while its economy is 8x larger. So Spain is actually doing relatively better than Germany.

We are often asked how we can revive IPO markets, and whether it is a supply issue (number and quality of companies going public) or a demand issue (breadth of the investor base participating in IPOs).

To us, the issue is clearly on the demand side. Spain and Germany are bigger economies with more companies — but the bar is higher for a successful IPO. Domestic investor base and retail equity ownership are lower than in Sweden.

European governments need to incentivize higher equity ownership and direct more savings into funding domestic growth companies.