Croatian Firms More Open to IPOs Than Slovenian Counterparts, Study Finds

Croatian business owners exhibit a greater readiness to open up their companies' ownership structures and secure growth capital via the stock market compared to their Slovenian counterparts. This difference stems from varying perceptions and market conditions, with Slovenian entrepreneurs often linking public listings to a loss of control, administrative burdens, and heightened public exposure.

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Croatian owners are somewhat more willing to open up their company ownership and obtain money for growth through the stock exchange. In Slovenia, going public is still primarily associated with the loss of some control, additional administration, and greater public exposure.

Lojze Kozole from Ilirika notes that while public stock offerings yield numerous positive outcomes for companies, their owners, investors, and the broader capital market, Slovenia has seen a lack of recent IPOs. He attributes this partly to the strength of domestic investors in Croatia, particularly the mandatory second pension pillar, which provides a significant source of demand for shares. In contrast, Slovenia's voluntary supplementary pension savings are smaller, leading to less robust domestic demand for new stock issues.

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The Croatian mandatory second pension pillar regularly channels employee funds. Pension funds invest these assets long-term, making them an important source of demand for shares and capable of participating in new stock issues.

Kozole suggests that encouraging more IPOs in Slovenia would require greater public and institutional investor participation in capital markets, more favorable long-term savings conditions, reduced listing costs, and fewer administrative hurdles. Additionally, the state could play a role by utilizing the stock exchange more frequently for selling its stakes and offering shares to domestic investors.

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In Slovenia, additional pension savings are mostly voluntary and smaller in scope, so companies find it harder to count on comparable strong domestic demand in case of an IPO.

The positive effects of an IPO are multifaceted. For companies, it provides access to capital for investment, expansion, or debt reduction, offering an alternative to bank loans. It also enhances a company's visibility, reputation, and transparency, potentially strengthening management discipline and investor confidence. For owners, particularly in family businesses, an IPO allows for the sale of a portion of their stake without relinquishing full control, facilitating generational transitions while maintaining company independence.

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For a company, an IPO means access to fresh capital for investments, expansion into new markets, acquisitions, or debt reduction. Unlike a bank loan, the company is not dependent solely on the decision of one bank but can obtain funds from a wide range of domestic and foreign investors.