Rautanen of Inderes: A Nordic giant stock exchange would solve many problems

“The function of the stock exchange is to finance growth companies. The problem of availability of financing would be eased if the market were bigger,” says Rautanen

News agency Bloomberg news last week that a group called Nordic Compass is planning a new co-Nordic giant stock exchange. The purpose is for the Swedish, Norwegian, Danish and Finnish stock exchanges to unite into one market.

The group includes, among others, Wallenberg Investments, EQT, Nordea, Kone, Nasdaq, Novo Nordisk foundation, Nokia, Sitra and Patria.

Nordic Compass’s idea is that the Nordic countries will be able to compete better with, for example, the US capital market on a common stock exchange. The idea follows the statements of the European Commission, according to which Europe should unify its capital markets.

In all of them According to Rautanen of Inderes, an analysis company operating in the Nordic countries, the Nordic giant stock exchange has potential, but it is easy to see challenges as well.

The first challenge is clear: Finland, Sweden, Norway and Denmark are all four different countries with their own ways of doing things. How could these customs be unified?

“Our investor communication products also have to have a lot of local customization. There are a lot of different practices and cultures.”

Then there are the technical challenges, when Nasdaq is the stock exchange operator in Finland, Sweden and Denmark, and Euronext is Euronext in Norway.

“This is technically a very ambitious project. There are different local value-sharing systems and different operators.”

Iron says that, however, it is clear why we want to tackle these challenges and promote the project. It would be good for many companies, owners and citizens if the Nordic countries had a more unified capital market.

Let’s get to the heart of stock market logic.

Smaller Finnish companies have a serious problem: there are hardly any financiers here if they list on the stock exchange. Rautanen also knows this when he was taking Inderes to the stock market five years ago.

When a smaller company is listed on the Helsinki Stock Exchange, potential financiers are local private investors, funds that invest in smaller companies, and pension companies. There are very few of all of these in Finland.

“There is a very small number of institutional investors that a potential IPO can target in Finland.”

But would the problem of smaller Finnish companies be solved by having one giant stock exchange in the Nordic countries? Rautanen says that he is not sure.

“We have seen parallel listings where we went to Helsinki and Stockholm, but Stockholm was canceled because the stock did not fare well in the competition for attention with a thousand local companies.”

Swedish is the clear ruler of the Nordic stock markets. Sweden has a long culture of people’s capitalism, a lot of IPOs and a lot of great stories. According to Rautanen, Finland and Norway are “just fine”, but the Danish stock market “is withering”.

In Denmark, for example, there was a break for many years, when no IPOs were seen.

Rautanen emphasizes the diversity of the market. It increases the challenge of unification. But the giant stock exchange is not impossible, they say. It requires political will.

“I think this vision is also clearly linked to the European Commission’s vision of the capital market union.”

Nordic Compass has promised to present its vision at the summit in Gothenburg in November.