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Swedish IPO catapults the stock market into the big league of Europe

(Bloomberg) – Sweden is not only one of the best performing stock markets in Europe this year. It has also grown to be the country that offers investors the widest choice when it comes to choosing stocks.

Sweden – with a population of 10.2 million people – now has nearly 1,000 publicly traded companies, according to Bloomberg. This is the highest value in the European Union and outperforms much larger countries such as Germany and France. More than 80% of these are small caps with a market value of less than $ 1 billion.

The list gets longer, with IPOs of the caller ID app Truecaller and investment firm Storskogen Group AB in the works, even as some investors begin to wonder if the market is in a bubble. Sweden is headed for the busiest year for an IPO in more than two decades.

According to Jonas Strom, Stockholm-based CEO of investment bank ABG Sundal Collier, the dynamic market for smaller companies reflects the Nordic country’s thriving startup scene, less cumbersome regulation and deep investor base.

Sweden has a “unique ecosystem of investors,” said Strom in an interview. “There are many smaller professional investors here who do not need a 100 billion euro transaction, but are satisfied with 50 million euros.”

International bankers want to capitalize on capital formation by challenging Carnegie and ABG Sundal Collier’s domination domestically. The head of Nordic business for BNP Paribas SA said in May that he would be adding staff to the region while JPMorgan Chase & Co. was moving its Nordic investment banking team from London to Stockholm.

Still, as in many smaller markets, Sweden has seen some of its most promising startups overseas. Music streaming company Spotify Technology SA and oat milk manufacturer Oatly AB have both been listed in the US for the past few years. Bankers will be watching to see if the next wave of unicorns, including $ 46 billion lender Klarna Bank AB and payments company Trustly, do the same.

Read more: Spotify’s nest proves to be a fertile breeding ground for unicorns

Many other businesses are content to stay close to home. This year 83 companies went public in Stockholm this year, raising $ 6.4 billion.

Sweden has “many entrepreneurs willing to take risks and break new ground,” said Caroline Forsberg, a 25-year veteran of the country’s equity markets at SEB Investment Management AB.

This robust activity and the surge in stock prices are concerns that the market is overheating. Even before this year’s rally, a popular Warren Buffett valuation indicator – the market value as a percentage of GDP – showed that Sweden is far more expensive than other Nordic markets and the US

Since then, the OMX Stockholm 30 index of large stocks is up 25% and a broader market value is up 28%. The chief executive officer of investment firm Bure Equity AB said last month the market rally is raising “questions about whether the stock market is overvalued”.

The stock markets for small and medium-sized growth companies are “running out of fuel after a hysterical year,” said Joakim Bornold, consultant at Soderberg & Partners.

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