Nasdaq recently introduced the Nasdaq Stockholm IPO Pulse, providing insights into the IPO environment in Stockholm and the U.S. up to early 2025.
In June, the Nasdaq Stockholm IPO Pulse reached a 2½-year high, suggesting an uptrend in IPO activities which continued to a two-year peak in Q2. However, despite a decline in Q3, activities picked up again in September, nearing June’s high. Although there was a slowdown in IPO activities during Q3, partly due to seasonal vacation trends in Sweden, the quarter still recorded the second highest number of IPOs in the past six quarters.
The U.S.-focused Nasdaq IPO Pulse presented a similar narrative, with its index falling slightly in September but remaining just below July’s three-year high. IPO activity remained largely unchanged from Q2’s 2½-year high, with reports noting 126 operating companies and 34 special purpose acquisition companies (SPACs) going public in 2024.
The ongoing trend in IPO activity, despite past monetary tightening, could receive additional support from global rate cuts. Following recent rate reductions by major central banks including Sweden’s Riksbank, the European Central Bank, and the Bank of England, IPO activity is poised for a boost as monetary policies turn more accommodative. The Fed’s projections suggest a decrease in rates to 3% by the end of 2026, while market expectations see rates dropping to 3.4% by late next year. Similarly, forecasts suggest U.K. rates might decrease to 3.5% and Eurozone rates to 1.8% by 2026.
Earlier higher interest rates had negatively impacted IPO candidates, particularly smaller companies, by increasing borrowing costs and affecting valuations and margins. Data indicate that small caps, with a significant portion of floating rate debt, bore the brunt of rate hikes, doubling the share of interest expenses to earnings. As rates decline, an improvement in profit margins could enhance the financial profile of potential IPO candidates.
With the gradual easing of these financial pressures and upcoming post-election conditions, the IPO activity in the U.S. and Stockholm is projected to maintain its upward trajectory into 2025.
