Inderes CEO: A Nordic mega-exchange could solve several problems

A single Nordic stock exchange could help growth companies find financing, but Mikael Rautanen says the idea would be far from easy to execute.

Rautanen, the CEO of analysis firm Inderes, said a larger market would address one of the main purposes of an exchange: funding companies as they grow. He argued that a unified Nordic market could reduce the financing problems that encourage some companies to look toward the United States.

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The exchange’s function is to finance growth companies. Access to financing would improve if the market were larger.

The proposal comes from Nordic Group, which plans to present its vision for a joint Nordic mega-exchange in November. The group includes Wallenberg Investments, EQT, Nordea, Kone, Nasdaq, the Novo Nordisk Foundation, Nokia, Sitra and Patria. The plan would bring together the markets of Sweden, Norway, Denmark and Finland, allowing them to compete more effectively with the US capital markets.

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There are many different practices and cultures.

Yet the countries have different ways of doing business. “There are many different practices and cultures,” Rautanen said, noting that even Inderes’ investor-relations products require extensive local tailoring. The technical side would also be demanding: Nasdaq operates in Finland, Sweden and Denmark, while Euronext operates in Norway. The countries also use different local securities systems.

The proposal addresses a particular problem for smaller Finnish companies. When a company lists in Helsinki, its potential investors include local retail investors, small-cap funds and pension companies, but Rautanen said Finland has very few of them. He recalled cases in which companies pursued listings in both Helsinki and Stockholm but abandoned Stockholm because their shares struggled to attract attention among roughly 1,000 local companies.

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This is a technically very ambitious project. There are different local securities systems and different operators.

Sweden remains the strongest Nordic exchange market, supported by a long tradition of popular share ownership, many listings and a large number of compelling company stories. Rautanen sees potential in a joint exchange, but he is not certain it would solve the financing problems of smaller Finnish companies.

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There is a very small number of institutional investors that a potential listing company can target in Finland.