At the start of this year, we introduced the Nasdaq IPO Pulse, a leading index of U.S. initial public offering (IPO) activity. In our last update, the Nasdaq IPO Pulse had risen to a nearly three-year high, signaling increased IPO activity through the end of the year.
The IPO Pulse takes advantage of the fact that IPO activity rises and falls in cycles. Since this holds true in other highly developed IPO markets, the IPO Pulse framework can be adapted to those markets.
And that’s exactly what we did with the new Nasdaq Stockholm IPO Pulse!
Nasdaq Stockholm stands out for high retail and IPO activity
Stockholm makes sense as the first expansion of the IPO Pulse since it’s a leading European marketplace with the deepest capital markets on the continent.
As we’ve highlighted before, Sweden specifically, and the Nordics in general, have more active markets than other large European economies, in part because of retail participation.
In the Nordics, about a third of household financial assets are invested directly into equities (chart below, lighter blue portion of bars). That’s just behind the U.S. share, and it’s 50% greater than the Eurozone share and close to triple the U.K.’s share.
In addition, there’s significant investments via pensions and mutual funds (dark blue portion of bars), which make up another 30% of Nordic household financial assets. Again, that’s close to the share for the U.S. and 50% greater than the Eurozone share.
Chart 1: The Nordics, like the U.S., have higher rates of equity ownership than the Eurozone or U.K.
This underlying local investor base helps support companies with equity finance, which in turn attracts IPOs to Nasdaq Stockholm. Listings on Nasdaq Stockholm have doubled since 2012, while London, for example, has seen listings steadily decline.
The Nasdaq Stockholm IPO Pulse is a data-driven leading index of IPO activity
Given this vibrant equity market, Nasdaq Stockholm needed its own IPO Pulse.
Much like the U.S.-focused Nasdaq IPO Pulse, the Nasdaq Stockholm IPO Pulse anticipates directional shifts in IPO activity (chart below, green bars) before those turns occur.
Proven against three decades worth of data, the Nasdaq Stockholm IPO Pulse has a median lead of four months of turns in IPO activity over that same period. That’s why, in Chart 2 below, the Nasdaq Stockholm IPO Pulse (blue line) is advanced four months – to highlight the future direction of IPO activity.
In its latest cycle, the Nasdaq Stockholm IPO Pulse turned up in September 2022 – anticipating the September 2023 low in IPO activity – and has since increased to a 2½-year high. That suggests IPO activity, which has already tripled from its recent low to a two-year high in Q2 2024, is likely to remain in an uptrend in the coming months.
Chart 2: The Stockholm IPO Pulse (advanced four months) sees IPO activity trending up in H2
So, it looks like the IPO market picked up a bit in the first half of the year.
The Stockholm IPO Pulse combines six proven indicators into one index
Since the philosophy and construction of the Stockholm IPO Pulse mirrors that of the U.S.-focused IPO Pulse, it too relies on six individual indicators that theoretically should and empirically do lead shifts in IPO activity.
Once again, we tested more than 50 individual series before selecting the best-performing components and combining them into an index. We rely on:
- Market volatility
- Recent returns
- Valuations
- Consumer expectations
- Manufacturing prospects
- Some of Nasdaq’s proprietary IPO data
Of course, we had to take into account the unique characteristics of each market when selecting indicators. That’s why the Nasdaq Stockholm IPO Pulse incorporates some broader European data, given the interlinkages between Stockholm and the rest of Europe. Similarly, the target of the Stockholm IPO Pulse includes direct listings, unlike in the U.S., since direct listings have historically played a larger role in Stockholm.
You can learn more about the index in our white paper.
The Nasdaq Stockholm IPO Pulse signals a near-term uptrend in IPO activity
The creation of the Nasdaq Stockholm IPO Pulse expands our data-driven approach to anticipating cycles in IPO activity beyond the borders of the U.S. to another market where Nasdaq plays a central role in the healthy functioning of capital markets.
With the Nasdaq Stockholm in a clear upswing and at a 2½-year high in June, IPO activity in Stockholm should remain in an upturn in the near-term.
Michael Normyle, U.S. Economist at Nasdaq, contributed to this article.