In recent times, Swedish IPO transactions have increasingly been subject to the engagement of cornerstone investors. A cornerstone investor is normally a large, reputable Swedish institution that commits to subscribe for a substantial part of the offered shares prior to the announcement of the IPO. The concept is rather uncommon in other jurisdictions, which can make the structure rather unfamiliar to non-Swedish institutional investors.
In our view, the engagement of cornerstone investors has become a preferable alternative for some investment banks since these investors are considered to provide increased predictability regarding the success of the transaction. Normally, cornerstone investors are informed about the IPO process during one of the pre-meetings that the investment banks usually have with a few investors to receive feedback on the contemplated transaction and valuation.
Cornerstone investors have become appreciated participants to IPOs in Sweden and are considered to increase the probability for a successful transaction. Information about these investors, including the number of shares they have undertaken to purchase, is disclosed in the IPO prospectus. Issuers and/or investment banks that intend to engage cornerstone investors should always address this involvement with their legal transaction counsel(s) to verify that no rules or regulations are breached, considering that some investors are given different treatment compared to others.
It is yet too soon to tell if cornerstone investors will become part of the general IPO transaction structure in Sweden, but it is clear why investment banks appreciate their involvement in IPOs.