Earlier this year, we introduced Nasdaq IPO Pulse, a leading indicator of initial public offering (IPO) activity in the U.S. In our last update, Nasdaq IPO Pulse rose to a nearly three-year high and we expected IPO activity to pick up through the end of the year.
IPO Pulse takes advantage of the fact that IPO activity rises and falls in cycles, which is also true in other highly developed IPO markets, making the IPO Pulse framework applicable to those markets as well.
And that’s exactly what we did with the new Nasdaq Stockholm IPO Pulse.
Nasdaq Stockholm stands out for retail and IPO activity
Stockholm is a major European market with the deepest capital market on the continent, so it makes sense as IPO Pulse’s first expansion location.
As we have said before, Sweden, and the Nordic countries in general, have a more dynamic market than other major European economies, in part due to retail participation.
In the Nordic countries, about one-third of household financial assets are invested directly in stocks (light blue area in the graph below). This is just below the share in the United States and 50% higher than the share in the euro area. triple UK share.
Moreover, investments through pensions and mutual funds (the dark blue part of the bar chart) are also substantial, accounting for 30% of Nordic household financial assets, again close to the share in the US and 50% higher than the share in the euro area.
Figure 1: Nordic countries, like the US, have higher equity ownership than the Eurozone and UK.
This underlying local investor base backs companies with equity financing, which then attracts IPOs to Nasdaq Stockholm, where listings have doubled since 2012, while London, for example, has seen a steady rise in listings. decline.
Nasdaq Stockholm IPO Pulse is the leading data-driven indicator of IPO activity.
Given this vibrant stock market, Nasdaq Stockholm needed its own IPO Pulse.
Like the U.S.-focused Nasdaq IPO Pulse, the Nasdaq Stockholm IPO Pulse predicts shifts in IPO activity (chart below, green bars) before they happen.
As documented against 30 years of data, the Nasdaq Stockholm IPO Pulse leads the median IPO activity over the same period by 4 months. Therefore, in Figure 2 below, the Nasdaq Stockholm IPO Pulse (blue line) leads by 4 months, highlighting the future direction of IPO activity.
In the most recent cycle, the Nasdaq Stockholm IPO Pulse rose in September 2022 in anticipation of a September 2023 IPO activity low, before rising to a two-and-a-half-year high. This suggests that IPO activity, which has already tripled from its recent low to a two-year high in Q2 2024, is likely to maintain its upward trend in the coming months.
Figure 2: Stockholm IPO Pulse (4 months ahead) shows rising IPO activity in the second half of the year
So, the IPO market seems to have recovered a bit in the first half of the year.
Stockholm IPO Pulse combines six proven indices into one index.
Because the philosophy and composition of the Stockholm IPO Pulse mirrors that of the U.S.-focused IPO Pulse, it too relies on six separate indicators that should theoretically and empirically lead to changes in IPO activity.
Once again, we tested over 50 individual series and selected the best performing components to combine into an index based on the following factors:
- Market volatility
- Recent Returns
- evaluation
- Consumer expectations
- Manufacturing Outlook
- Some of Nasdaq’s own IPO data
Of course, the unique characteristics of each market had to be taken into account when selecting the index, which is why Nasdaq Stockholm IPO Pulse incorporates broader European data, taking into account Stockholm’s correlation with the rest of Europe. Similarly, Stockholm IPO Pulse’s coverage also includes direct listings, unlike the US, because direct listings have historically played a large role in Stockholm.
For more information about indexes, see White Paper.
Nasdaq Stockholm IPO Pulse indicates near-term uptrend in IPO activity
The creation of Nasdaq Stockholm IPO Pulse extends our data-driven approach to forecasting cycles of IPO activity beyond U.S. borders to another market where Nasdaq plays a central role in the healthy functioning of capital markets.
With Nasdaq Stockholm clearly on the rise, having reached a two-and-a-half-year high in June, IPO activity in Stockholm is expected to continue its upward trend in the short term.
Nasdaq U.S. economist Michael Normile contributed to this article.
