Investors and companies hold back in uncertain times. But financial leaders expect the dry season to end soon.
FEWER GO HERE: Companies were lining up a couple of years ago, but now they’ve made a U-turn. Photo: Emilie Holtet / NTBPublished: Published:
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As of 2023, only seven companies were listed on the Oslo Stock Exchange, a number that stands in stark contrast to the euphoria of a few years ago.
In 2020 and 2021, the Norwegian stock market has been red hot. Many companies went public, interest rates were low and the willingness to take risks was sky-high among investors.
Now the situation has changed.
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Alexander Opstad heads DNB Markets, Norway’s largest brokerage firm. He points out that interest rates have risen and believes investors are more uncertain.
– A good number of IPOs have developed very poorly. Skepticism has become clear among investors participating in IPOs, Opstad says.
Several companies listed during the stock market boom suffered sharp declines in value, including in the renewable energy sector.
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Opstad believes that historically strong years should be partly responsible for the share price decline in 2023.
– Many of the candidates who had stock exchange plans we simply got rid of, says the director of the broker.
An important part of the brokerage firm’s business is helping companies go public. These assignments are often profitable and represent an important source of income for them.
Opstad points out that the number of IPOs happens in cycles.
– There tend to be periods of few and many IPOs. In this sense it is completely normal.
There are currently 338 companies listed on Oslo Børs trading floors, a historically high number.
The global stock market has largely performed well this year, but the stock market rally has been centered on a small number of stocks, particularly in the technology sector, according to Opstad.
– In some sectors the valuations were not so attractive. Companies intending to go public choose to postpone their listing.
Alexander Opstad, Head of DNB Markets Photo: Cicilie S. Andersen, E24
– The uncertainty was decisive
One company planning to go public is Jordanes, which owns a number of well-known brands, such as Sørlandschips, Synnøve Finden and Peppes Pizza. The company announced in November that it would postpone the IPO indefinitely and highlighted market conditions.
Stock exchange director Øivind Amundsen says companies are undecided.
– Many companies want to go public, but they have held back. We thought things would improve this fall, but then uncertainty increased with the war in Gaza, Amundsen says.
– The stock market is up nearly 10% this year. Why don’t companies join the boom?
– It’s been a pretty good year for stock markets, but there have also been some fluctuations. Many fear that unforeseen events will happen and that the journey will be negative.
Stock exchange director Øivind Amundsen Photo: Beate Oma Dahle / NTB
Amundsen points out that large IPOs, for example in the United States, have performed poorly.
– Several companies collapsed in the first period after the listing. It is spreading all over the world. Then wait, if it’s not absolutely necessary. The uncertainty was decisive for companies that chose to wait for the listing.
Norway’s weak IPO year is part of a bigger picture. According to the Financial Times, the value of transactions carried out globally this year is at the lowest level since 2013.
Looking for signs of interest
However, there will be more IPOs in 2024, according to broker Opstad and stock exchange director Amundsen.
Stefan Schander Slemdal is also waiting. As head of equity transactions at Carnegie, he is close to Norwegian IPOs.
– We do not believe that the level of activity will return to 2020 and 2021 levels, but we expect an increase compared to the last two years towards more normalized levels. This assumes that expectations of lower interest rates materialize, while at the same time avoiding recession in major economies globally.
One thing that makes Slemdal more positive about the future is that he is starting to see more interest among investors in small and medium-sized businesses again. In a Norwegian context, typically companies up to 10 billion NOK in market value.
Stefan Slemdal, head of Carnegie’s equity department. Photo: Carnegie
For there to be a lot of activity among new listings, there must be interest in investing in this size segment, according to Slemdal. This is where most of the Norwegian transaction flow is concentrated, he points out.
According to Slemdal, for a couple of years investors have chosen to focus on larger and more stable companies, such as the so-called “stock locomotives”.
– We are starting to see signs that additional returns are again expected investment returns beyond what is normal in a market for investments in SMEs, small and medium-sized enterprises, says Slemdal.
– Now we see that capital is flowing back into Nordic mutual funds with a focus on such companies. Historically, this has been an important factor in listing activity, Slemdal says.
He also points out that many of the more recent IPOs have provided good returns to investors.
Major IPOs of the year include engineering firm Norconsult and offshore shipping company Dof, which returned to the stock market after bankruptcy. Both shares increased in price after the listing. DNB Markets and Carnegie were among the facilitators.
– Investors who dared to take the opportunity had a great trip. We believe this will increase appetite for further IPOs in 2024, says Slemdal.
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