Deutsche Bank Sees Nordic IPOs Bouncing Back From Lull Next Year

• Listings slow after Sweden topped 2021 European IPO rankings
• Market will get used to rates, Deutsche Bank’s Olsson Says

Last year’s new listings hot-spot in the Nordics has fallen quiet, but Deutsche Bank AG’s regional head expects the market to revive before the first half of 2023 is done.

Plummeting equity valuations and the gloom surrounding the region’s tech-heavy startup scene aren’t going to have a long-term negative effect on the outlook for fund raising, according to Jan Olsson, who oversees Norway, Denmark, Finland, Iceland and Sweden for the lender.

The Nordic region has a very dynamic market for startups,” Olsson said in an interview. “What we see in the market right now won’t stop that development.”

Like other markets, the Nordics have suffered a sharp drop in initial public offerings and other equity capital market transactions. That’s in stark contrast with a record-breaking 2021 that saw Stockholm at the top of continental Europe’s league for IPOs.

Rising interest rates and fears of a recession have reduced investor appetite for risk and all but halted the flow of IPO deals across Europe. In a striking example of the change in sentiment, the valuation of Swedish buy-now, pay-later giant Klarna Bank AB dropped to $6.7 billion in its latest funding round this week from the $45.6 billion achieved in June 2021.

Tech startups that are managing to defy the tougher market conditions include Swedish battery-maker Northvolt AB, which last week secured an additional $1.1 billion in funding at last year’s valuation of $12 billion. A week earlier, chairman Carl-Erik Lagercrantz said an IPO is still likely within two years.

The chief executive officers of battery-storage developer Polarium Energy Solutions AB and electric truckmaker Einride AB have said in interviews they remain committed to their IPO plans.

“Given the relatively high activity in percentage terms that we saw in the Nordics last year, the slowdown we see now is of course also a bit worse,” relative to other markets, said Olsson. He’s a 33-year veteran at Deutsche Bank who has been its regional CEO for seven years.

While some companies in search for new funding have needed to lower their valuations​​, “they are still worth a lot — these are still large companies,” Olsson said.

Companies and investors will adjust to higher rates and the market will stabilize, he said. “Right now it’s headline news, but in the long run, these are fine companies with good cash flow, good sales and fine products. They will continue to expand and valuations ​​will rise again. But not right now.”

He pointed to the “incredible abundance” of tech and fintech companies in Sweden and Finland, and the energy related sectors in Denmark and Norway as reasons for being optimistic that IPOs will show signs of revival in the Spring of next year after the current lull.

“This is not the apocalypse,” he said. “Rates used to be normality. We’ll get used to them again.”