At the beginning of this year, Nasdaq introduced the Nasdaq IPO Pulse, an index tracking U.S. initial public offering (IPO) activity. In the most recent update, the Nasdaq IPO Pulse had reached a nearly three-year high, indicating an increase in IPO activity projected until the end of the year.
The Nasdaq IPO Pulse leverages the cyclical nature of IPO activity, a pattern that extends to other advanced IPO markets. This cyclicity is the foundation that allows the IPO Pulse framework to be adapted for different markets, such as the newly launched Nasdaq Stockholm IPO Pulse.
### Nasdaq Stockholm: A Hub for Retail and IPO Activity
Stockholm has been chosen as the first expansion of the IPO Pulse due to its prominence as a leading European marketplace with the deepest capital markets on the continent. Sweden and the Nordic region, in particular, have more active markets compared to other major European economies, largely due to higher participation from retail investors.
In the Nordic countries, approximately one-third of household financial assets are directly invested in equities, following closely behind the U.S. This rate is significantly higher than the Eurozone and nearly three times that of the U.K. Additionally, investments through pensions and mutual funds account for another 30% of Nordic household financial assets, comparable to the U.S. and 50% higher than the Eurozone.
This robust local investor base supports companies with equity finance, thereby attracting more IPOs to Nasdaq Stockholm. Since 2012, listings on Nasdaq Stockholm have doubled, in contrast to a steady decline in listings in markets like London.
### The Nasdaq Stockholm IPO Pulse: A Data-Driven Leading Index
Given the vibrant equity market, Nasdaq Stockholm needed its own IPO Pulse. Similar to the U.S.-focused Nasdaq IPO Pulse, the Nasdaq Stockholm IPO Pulse forecasts directional shifts in IPO activity. With a median lead time of four months, the Nasdaq Stockholm IPO Pulse has historically predicted turns in IPO activity over a 30-year period.
In the most recent cycle, the Nasdaq Stockholm IPO Pulse began to climb in September 2022, predicting a low in IPO activity by September 2023. Since then, it has risen to a 2½-year high, suggesting that IPO activity will likely continue its upward trend in the coming months.
### Constructing the Stockholm IPO Pulse
The construction of the Stockholm IPO Pulse mirrors that of the U.S. index, relying on six indicators that both theoretically and empirically predict shifts in IPO activity. These include market volatility, recent returns, valuations, consumer expectations, manufacturing prospects, and some proprietary Nasdaq IPO data.
However, the Stockholm IPO Pulse also factors in broader European data, recognizing the economic interconnectedness between Stockholm and the rest of Europe. Furthermore, the index includes direct listings, which have historically played a more significant role in Stockholm compared to the U.S.
### Near-Term Uptrend in IPO Activity
The creation of the Nasdaq Stockholm IPO Pulse extends the data-driven approach to anticipating IPO activity cycles beyond the U.S. With the index at a 2½-year high in June, IPO activity in Stockholm is expected to remain in an uptrend in the near term.
Michael Normyle, a U.S. Economist at Nasdaq, contributed to this article.
