HELSINKI (Reuters) - Companies are once more seeking to list on Helsinki’s stock exchange after a dearth of initial public offerings (IPOs) in recent years, as new banking regulations make it harder for them to borrow funds, the president of Nasdaq OMX Helsinki said.
Once a hot-bed of technology listings, the last fully-fledged IPO on Helsinki’s main list was in 2007 amid a sluggish economy and a lack of new growth industries. Most recent offerings have come from spin-offs or dual-listings.
IPOs can give companies more capital for expansion and are considered a measure of an economy’s growth potential.
Low capital volumes and several delistings, including the recently bankrupt Tiimari TII1V.HE, have meant the Helsinki exchange has lagged bourses in neighboring Nordic nations and raised doubts over Finland’s reputation as an innovative economy.
The Finnish bourse has added 12 new names to its main list since 2007, compared with 41 in Stockholm and 30 in Copenhagen. Nasdaq OMX’s market for smaller companies, First North, has also failed to attract Finnish growth companies: it currently has 5 companies from Finland, 144 from Sweden and 28 from Denmark.
“It is true that following the financial crisis we had a very long dry season on the Helsinki Stock Exchange in terms of new listings,” exchange president Lauri Rosendahl told the Reuters Nordic Investment Summit on Wednesday.
“However, during the last 12 to 18 months that has turned around, and in a very positive way.”
He noted the planned listings of restaurant firm Restamax and real estate trust Orava, and said the bourse was in talks with other companies contemplating IPOs, both on the main stock exchange and First North.
He declined to say how many companies were involved.
“The outlook is pretty okay,” he said. “If the conditions are favorable, I think we will have more companies.”
Rosendahl, who is also in charge of Nasdaq OMX’s equity and derivatives trading for the entire Nordic region, said the exchange would benefit from Basel III global financial rules.
Many banks are restricting lending as they work towards the regulations that compel them to hold far more capital relative to their loans than they did before the 2007-09 financial crisis. The rules, which will be phased in between now and 2019, can be met by reducing lending, raising more capital or both.
“Banks will not be able to finance companies the way they used to,” Rosendahl said. “In Finland this change is particularly big because we have the most bank-centered debt capital market in Europe.”
Finland is one of the few triple-A rated economies in the euro zone, but fell into recession earlier this year as its exports have been hit by Europe’s prolonged economic downturn.
In addition to a lack of listings, the Helsinki bourse has also seen low trading volumes.
The Helsinki exchange’s turnover fell to 98.7 billion euros ($133.5 billion) last year, around 75 percent lower than in 2007, although Rosendahl said that was a Europe-wide trend,
He said the sale of Nokia’s NOK1V.HE handset business to Microsoft (MSFT.O) could lead to a further drop in investors’ interest in the bourse. In its heyday, the one-time mobile phone leader helped to attract global investors to the Finnish market.
“The impact (of Nokia’s deal) will be big of course, because it has been the flagship company,” said Rosendahl, who previously followed the handset maker as a technology analyst.
“But as you know, (Nokia) has been having its difficulties for a number of years ... so the risk ... in terms of trading volumes and share price development and so forth, that has practically already materialized.”
Another problem for the Finnish market has been the low level of investment capital, and Rosendahl said this was partly due to high taxes which discourage households from investing.
Finnish households held a total of 80 billion euros in bank accounts as of the end of 2012.
Rosendahl said the government should cut taxes on listed companies’ dividend payments, which are currently higher than those paid out by private firms. The status quo is also seen as an obstacle for companies’ IPO plans.
“You don’t find that kind of structural difference anywhere else,” Rosendahl said of the tax, which he called an “odd old anomaly”.
“We will definitely need all the capital we have in this country to be in the most efficient use, so to say. Households are traditionally very defensive in their savings approach in Finland relative to most other countries.”
In another effort to boost activity, the bourse is looking to establish a market where small and medium-sized companies would be able to issue debt on a public market, Rosendahl said.
($1 = 0.7393 euros)
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Additional reporting by Terhi Kinnunen; Editing by Ritsuko Ando, Pravin Char and Mark Potter