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Stockholm — Sweden is not only one of the best-performing equity markets in Europe in 2021, it is also the country that offers investors the most choice when it comes to picking stocks.

Sweden — with a population of 10.2-million people — now has almost 1,000 listed companies, according to data compiled by Bloomberg. That is the most in the EU, outstripping much bigger countries like Germany and France. More than 80% of them are small caps, with market values of less than $1bn.  

The list is getting longer, with initial public offerings (IPOs) in the works from caller-ID app Truecaller and investment firm Storskogen, even as some investors start to question whether the market is in a bubble. Sweden is heading for its busiest year for IPOs in more than two decades. 

The vibrant market for smaller companies reflects the Nordic nation’s thriving start-up scene, less cumbersome regulation and deep investor base, according to Jonas Strom, the Stockholm-based CEO of investment bank ABG Sundal Collier. 

Sweden has a “unique ecosystem of investors”, Strom said in an interview. “Here there are many smaller professional investors that don’t need a €100bn transaction but are happy with €50m.” 

International bankers are looking to profit from the capital formation by challenging the domestic dominance of Carnegie and ABG Sundal Collier. The head of BNP Paribas’s Nordic business said in May he was adding staff in the region, while JPMorgan moved its Nordic investment banking team to Stockholm from London. 

Still, like many smaller markets, Sweden has seen some of its most promising start-ups look abroad. Music streaming company Spotify and oat-milk maker Oatly both listed in the US in recent years. Bankers will be watching to see if the next wave of unicorns, including $46bn lender Klarna Bank and payments firm Trustly, do the same.

Plenty of other businesses are content to stick close to home. So far in 2021, 83 companies have gone public in Stockholm, raising $6.4bn. 

Sweden has “a lot of entrepreneurs that are willing to take risks and bet on new ways of doing things”, said Caroline Forsberg, a 25-year veteran of the country’s equity markets at SEB Investment Management.

That robust activity, and the surge in stock prices, is causing concern the market is overheating. Even before the 2021 rally, a favourite valuation indicator of Warren Buffett — market value as a percentage of GDP — showed that Sweden was far more expensive than other Nordic markets and the US.

Since then, the large stock OMX Stockholm 30 index has surged by 25% and a broader market gauge is up 28%. The CEO of investment firm Bure Equity said in August the market’s rally raises “questions over whether the stock market has become excessively overvalued”. 

Stock markets for small- and medium-sized growth companies “are running out of fuel after a hysterical year”, said Joakim Bornold, an adviser at Soderberg & Partners.

Bloomberg News. For more articles like this please visit Bloomberg.com.


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