A look at the lack of new listings

As fellow investors will have noticed, Nasdaq Helsinki hasn't seen many new listings for a couple of years. The IPO boom of 2021-22 has been followed by a post-bubble hangover. However, investors can expect further IPOs within a year, unless the economy falters again. 

Listings are a double-edged sword for investors. On the one hand, the basic requirement for stock picking is a stock exchange where there are shares to buy. Without IPOs, the stock market will slowly wither away as old companies are bought out. The longer duration of growth companies in the hands of private equity investors means that the ordinary equity investor cannot get in on the early-stage stories.

On the other hand, IPOs have a bad habit of coinciding with peak cycles. Their returns are uneven.

I looked at 85 listings from 2013 to 2024. The median return on the first day of listing relative to the IPO price was +3%, but the return for the year was only 0.3%. Granted, there is a big difference depending on when the companies went public. In the stingy bull market of 2013-2020, the median return for the first year of a company's listing was +16%, while the corresponding median return for the bubble listings of 2021-22 was -14%! The next time you feel FOMO coming on for an IPO, it's worth reminding yourself of these statistics.

Moreover, IPOs are not always stories full of promise, but rather flimsy tall tales. Some of the worst IPO bombs in Helsinki in recent years were Lifa Air (now Pallas) and Fifax, both of which plunged 90% or more. On the other hand, Kempower, which was listed on the verge of a stock market plunge, rose +300% in its first year. Lehto, now flirting with bankruptcy, is among the most profitable IPOs of the past decade, with a share price gain of more than 100% in its first year on the market. While it is generally recognized worldwide that IPOs usually underperform, it is worth considering each listing on a case-by-case basis. 

There is potential for IPOs even in Finland, where the economic debate is dominated by pessimism. In a recent interview, Professor Mika Maliranta pointed out that a huge number of companies in the product development phase were started in Finland around 2010. They are now beginning to show their maturity. Examples of this in the stock market include Aiforia and Spinnova, which were both founded in the early 2010s.

There is money in Finland too: households have 110 BNEUR sitting in their bank accounts, but only 42 BNEUR in direct equity investments. There's plenty of stock market funding available for business ideas.

There is a list compiled by private equity investors of over 50 potential companies in Finland that could go public in the next few years. Since family businesses and the like are not included, you can say that there are at least 50 potential IPOs. There are now less than 200 companies listed on Nasdaq Helsinki, so this would be a significant increase.

Investors have money, but the current owners of the companies are waiting for better times.