The past 12 months have not been the best for European IPO activity, with EMEA IPO proceeds (including SPACs) falling 24 percent year-on-year to US$22.19 billion.

After a challenging year when IPO appetite was impacted by rising interest rates and high inflation, it is hoped that European IPO activity will rally. Issuers and businesses in Sweden and the Commonwealth of Independent States (CIS) region are hoping to be at the forefront of the rebound.

Clearing a backlog

IPO deal flow was restricted in 2023 in both jurisdictions. The CIS has always been a small market, delivering only two IPOs in 2023 with less than US$30 million in proceeds for the year.

However, in Sweden, the downswing has been pronounced. There was only one IPO on the Nasdaq Stockholm last year, with proceeds coming in at US$210 million—well below the US$358 million in proceeds raised in 2022 and a far cry from the exceptional performance of the Swedish IPO market in 2021, when 24 IPOs on the Nasdaq Stockholm raised proceeds of US$9.53 billion.

View full image: Sweden Nasdaq Stockholm IPO deal value, 2017 – 2023 (PDF)

Sweden has been directly impacted by slowing private equity exit activity. Over the past ten years, the Swedish IPO market has seen more private equity players enter the market, and with private equity managers extending the hold periods of portfolio companies through rising interest rate cycles, the pipeline of IPO deals has run dry. There were only 20 private equity exits in Sweden in 2023—the lowest number since 2016, according to Mergermarket.

Unexited private equity backlog should spur an uptick

However, private equity firms will only be able to delay exits for so long, and with Bain & Co. reporting that the value of unexited private equity portfolio companies is more than four times the levels seen during the 2008 global banking crisis, private equity firms will have to start exploring IPO options for exiting soon.

Pent-up investor demand after 12 months of limited opportunity will also have to be released. Sweden has an established retail and family office investor base that has always had a strong appetite for backing new IPO opportunities. IPOs also receive consistent institutional support from the country’s large AMF and AP pension funds. After a dearth of activity in 2022 and 2023, these investors will be eager to start deploying capital in IPOs that come to the market in 2024.

At the end of last year, there were some signs that the IPO window was reopening and providing investors with more opportunities to invest. The IPO of discount retailer Rusta received strong support and, looking ahead to the rest of 2024 and the beginning of 2025, the pipeline for potential IPOs is looking much more promising than a year ago.

View full image: Sweden Nasdaq Stockholm IPO count, 2017 – 2023 (PDF)

For example, real estate group SBB is considering listing its subsidiary Public Property Invest, Swedish industrial group Novedo may pursue an IPO in 2024 after exploring its options to list last year and battery maker Northvolt may proceed with its listing on the Stockholm exchange; if successful, the business could be worth as much as US$20 billion, according to the Financial Times.

Investors are also monitoring Sweden as a hub for potential cross-border listings, with buy-now-pay-later fintech group Klarna among the Swedish companies exploring IPO opportunities in the US, according to Finance Magnates.

International investors lean into CIS

For CIS IPO candidates, cross-border listings are also expected to be a driver of activity.

The conflict in Ukraine and sanctions regimes targeting Russia have prevented Russian-based companies from listing abroad, prompting global investors to pay closer attention to opportunities emerging from neighboring CIS regions. International investors have also kept a close eye on ongoing privatization programs in CIS countries as a potential source of IPOs from the region.

Cross-border IPOs that have already emerged from the CIS region this year include the Nasdaq debut of Kaspi.kz in January. For its US listing, the Kazakhstan-based fintech company raised US$1 billion in a deal valuing the company at more than US$17.51 billion.

A month later, Kazakhstan airline Air Astana successfully landed an IPO in London, valuing the carrier at around US$847 million.

In the coming years, Uzbekistan also aims to be a leading CIS country in terms of attracting investor interest.

The recent privatization program extends the government of Uzbekistan's privatization plans for future years, with the firm intention to allow certain large state-owned companies to go public, including by way of IPO. Earlier this year, Shavkat Mirziyoyev, the president of Uzbekistan, also publicly discussed plans of obtaining an international credit rating for the national airline, Uzbekistan Airways, and plans for its potential IPO.

As global investors look for alternatives to the Russian market, a window has opened for other CIS companies to also go global.

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