Market overview

Size of market

What is the size of the market for initial public offerings (IPOs) in your jurisdiction?

The Nordic IPO market, and the Swedish market in particular, has been notably strong in recent years, and 2018 turned out to be a solid year (although not as strong as the record year 2017) in terms of, inter alia, the number of listings. It could, however, be noted that 2018 was a record year in terms of the number of transfers from Nasdaq First North (First North) to the Swedish main market Nasdaq Stockholm. During 2018, approximately 90 IPOs were conducted in the Swedish market (including transfers from First North to Nasdaq Stockholm); approximately 65 were on multilateral trading facilities (MTFs) and the rest were on the regulated markets. In the first quarter of 2019, fewer than 15 IPOs were conducted in the Swedish market, whereof three were on regulated markets (of which one was a transfer from an MTF to Nasdaq Stockholm), a slight decrease in comparison to the number of IPOs conducted during the same period in 2018.

Issuers

Who are the issuers in the IPO market? Do domestic companies tend to list at home or overseas? Do overseas companies list in your market?

The issuers in the Swedish market originate from many different sectors. During 2018, healthcare, technology, industrials and financials were the sectors with the most listings. Swedish companies tend to list at home, although there are exceptions, in particular with respect to certain sectors where the investors’ focus is targeted at a specific exchange. Overseas companies do list in Sweden. A substantial number of the foreign companies currently listed in the Swedish market originate from the Nordic region and Canada.

Primary exchanges

What are the primary exchanges for IPOs? How do they differ?

There are two regulated markets in Sweden, Nasdaq Stockholm and Nordic Growth Market NGM AB (NGM Equity). First North, which is Nasdaq Stockholm’s junior market, is an MTF and not a regulated market for EU Directive purposes, and is thus subject to a lower level of regulation. An issuer with the intention to list its shares on First North may choose to apply for a listing of its shares on Nasdaq First North Premier, which is a premier segment targeted at companies that make a conscious decision to comply with higher disclosure and accounting standards than the rules applicable on the regular First North segment. NGM AB has a junior marketplace equivalent to First North, named NGM Nordic MTF (NGM Nordic). There is also a third marketplace for equities in Sweden, Spotlight Stock Market (formerly AktieTorget), which is an MTF operated by ATS Finans AB.

Regulation

Regulators

Which bodies are responsible for rulemaking and enforcing the rules on IPOs?

The competent authority in Sweden is the Swedish Financial Supervisory Authority (SFSA). The SFSA is, among other things, responsible for ensuring compliance with EU regulations relating to financial markets and Swedish securities legislation. One of the SFSA’s key roles is to supervise exchanges and monitor companies that operate on the Swedish financial markets. Further, the SFSA prepares and issues regulations and guidelines with respect to the financial markets and stakeholders operating on such markets. Listing rules containing, inter alia, listing requirements are issued by the stock exchanges and MTFs. Pursuant to the Swedish Securities Markets Act (2007:528) (the Securities Markets Act), a stock exchange (ie, a regulated market) is to have a disciplinary committee for the purpose of handling matters regarding breaches by issuers of the applicable rules. Moreover, the Swedish Securities Council (the Council) is one of the key organisations as it promotes good practices in the Swedish stock market through statements, advice and information. The Council is a private body made up of representatives from various organisations and, along with the Swedish Corporate Governance Board (the Board), the Council for Swedish Financial Reporting Supervision and the Swedish Financial Reporting Board, forms part of the Association for Generally Accepted Principles in the Securities Market. Further, the Board has issued the Swedish Corporate Governance Code (the Code). The Code is mainly applicable to companies whose shares are admitted to trading on a regulated market, although only on a ‘comply or explain’ basis. For further information about the Code, refer to question 11.

Authorisation for listing

Must issuers seek authorisation for a listing? What information must issuers provide to the listing authority and how is it assessed?

Issuers must apply to the relevant regulated market for admission to trading, or to the relevant junior market place for listing. The listing rules of the regulated markets and the junior markets provide requirements with respect to eligibility and documents to be provided by issuers. Principle eligibility requirements for admission of shares for trading on the regulated markets include the following:

  • the issuer must be duly incorporated or otherwise validly established according to the relevant laws of its place of incorporation or establishment;
  • the securities of the issuer must conform with the laws of the issuer’s place of incorporation and have the necessary statutory or other consents;
  • the securities must be freely negotiable;
  • the application for admission to trading must cover the entire class of shares;
  • the issuer shall demonstrate that it possesses documented earnings capacity on a business group level or, alternatively, an issuer that does not possess documented earnings capacity shall demonstrate that it has sufficient working capital available for its planned business for at least 12 months after the first day of trading;
  • conditions for sufficient demand and supply shall exist;
  • a sufficient number of securities shall be held in public hands (25 per cent with respect to Nasdaq Stockholm and 10 per cent with respect to NGM Equity). In addition, the issuer shall have a sufficient number of shareholders;
  • the board of directors of the issuer shall be composed so that it sufficiently reflects the competence and experience required to govern and control a listed company;
  • the management of the issuer shall have sufficient competence and experience to manage a listed company;
  • the issuer must have capacity for providing information to the market; and
  • the issuer shall be subject to a legal due diligence.
Prospectus

What information must be made available to prospective investors and how must it be presented?

Normally, when an issuer makes an offer of securities to the public or applies for admission of securities to trading on a regulated market, a prospectus must be approved by the SFSA and published. The prospectus must be reviewed and approved by the SFSA pursuant to the Swedish Financial Instruments Trading Act (1991:980) (the Trading Act) and in compliance with Directive 2003/71/EC (the Prospectus Directive), including the Commission Regulation (EC) No. 809/2004 (the Prospectus Regulation), Regulation (EU) 2017/1129 (to the extent in force) (as amended or supplemented) and any other relevant implementing measures, as the case may be (jointly, the Prospectus Rules). The prospectus should, as a main rule, be prepared in Swedish. However, in certain situations, the prospectus may be drawn up in English. If that is the case, the SFSA may decide that the prospectus summary must be translated into Swedish. The opening part of the prospectus must include a table of contents, a summary and the risk factors relating to the relevant kind of issuer and securities. Other information required to be addressed in the prospectus is set out in the Prospectus Regulation.

Publicity and marketing

What restrictions on publicity and marketing apply during the IPO process?

Swedish law does not specifically regulate the topic of communication with the press, or other general publicity or communication with securities analysts or investors prior to and during an IPO. Such publicity or communication is generally permissible. Because it is important that all information of significance about the issuer is included in the prospectus and not disseminated to the market in any other manner, due care and monitoring of the dissemination of information is required. Pursuant to the Trading Act, any advertisements about the IPO must include a statement that a prospectus has been published, or will be published, and information on how to get hold of it. The advertisement must be presented in such way that it cannot be mistaken for something other than an advertisement. The information provided in the advertisement may not be incorrect or misleading and must also be consistent with the information provided in the prospectus. If a prospectus has not yet been published, such information must be consistent with the information to be provided in the prospectus. Other information provided by an issuer in relation to an IPO (eg, reports and suchlike) must be consistent with the information provided in the prospectus.

Enforcement

What sanctions can public enforcers impose for breach of IPO rules? On whom?

The SFSA is responsible for the supervision of regulated markets and MTFs. If the SFSA believes that a regulated market or an MTF has been involved in an IPO where the IPO rules have been breached, the SFSA can investigate the matter and sanction the regulated market or MTF if the breach can be attributed to shortcomings on the part of the regulated market or MTF. Sanctions include criticism, orders, remarks, warnings, sanction fees and a revoked licence. To an extent, the SFSA’s supervision also includes certain non-firms and individuals operating on the financial markets. This relates, for example, to dissemination of information by listed companies to the market through prospectuses and to issues related to Regulation (EU) No. 596/2014 on market abuse, as amended (Market Abuse Regulation). If the SFSA finds that there are reasonable grounds to believe that an offer of securities or an application for admission of shares on a regulated market contravenes the rules of the Trading Act or the Prospectus Regulation, the SFSA can temporarily suspend the offer or admission to trading. In such cases, an offer directed to the public can also be permanently prohibited. Advertisements regarding an offer for securities to the public or an admission of securities can be permanently prohibited on the grounds specified in the Trading Act.

Timetable and costs

Timetable

Describe the timetable of a typical IPO and stock exchange listing in your jurisdiction.

The time from initiation of an IPO procedure until the consummation thereof normally amounts to approximately four to six months; the timeline is, however, to some extent dependent upon the choice of marketplace on which the shares of the issuer are to be listed. In this respect, it could be noted that Nasdaq Stockholm provides a fast-track alternative for companies that are very well prepared. In normal cases, such a fast-track process consumes five weeks in total.

When an IPO process is initiated, the issuer usually begins the process by retaining a number of advisers, including, for example, financial and legal advisers, auditors, public relations advisers and a certified adviser or a mentor (in the case of an intended listing on First North or NGM Nordic). The issuer typically enters into an engagement letter with the financial adviser or advisers.

The preparatory phase of an IPO on a regulated market will include contacts with the relevant stock exchange, which will appoint an exchange auditor for the purpose of assessing whether it would be appropriate to list and admit the securities in question to trading. In cases where the issuer seeks to conduct an IPO on an MTF, there is no exchange auditor involved. However, the issuer must, in the case of a listing on First North, engage a certified adviser in connection with the application process. It is the certified adviser’s obligation to guide the issuer through the listing process and to make sure that the rules of First North are fulfilled at the time of the listing as well as continuously thereafter. With respect to NGM Nordic, an issuer must instead engage a mentor. In addition, in many cases (regardless of the choice of marketplace) a pre-audit is performed by a separate auditor.

Further, the preparatory stage of an IPO will include the carrying out of due diligence exercises (legal, financial and tax). The legal due diligence is mandatory with respect to companies looking to get their shares admitted to trading on a regulated market. However, most IPOs include a due diligence exercise, regardless of the choice of marketplace. The nature of the review is somewhat more limited in comparison to due diligence performed in connection with a private merger and acquisition transaction.

The preparatory phase of an IPO also includes, for example, prospectus drafting and preparation of transaction documents (such as research guidelines, publicity guidelines, placing agreement and lock-up undertakings).

When the prospectus is more or less finalised, it is to be submitted to the SFSA for review and approval. Provided that the issuer’s securities have not previously been offered to the public or been admitted to trading on a regulated market, the SFSA shall, pursuant to the Trading Act, decide upon eventual approval within 20 business days of the submission of the application.

An IPO process will also involve analyst education and pre-marketing activities primarily involving the issuer and the financial advisers appointed. Such activities include, for example, analyst presentations, question and answer sessions, early-look investor meetings, pilot fishing and roadshows. Further, research reports will be prepared by the research analysts involved. The management of the issuer is normally expected to comment on drafts of such reports.

The issuer is also required to submit a formal application for admission to trading or listing to the relevant marketplace, the approval of which may be subject to several conditions, such as the prospectus being approved by the SFSA and the issuer fulfilling the applicable free-float requirements (which normally cannot, however, be determined prior to the allocation of shares).

Once the issuer feels confident that it will proceed with the IPO, the issuer often publishes an intention to float announcement. At this time, the research reports prepared by the involved research analysts will typically be published.

At quite an early stage in the IPO process, the issuer’s financial advisers usually provide an indicative valuation of the issuer. At a later point in time, before the commencement of the application period, a price range or a fixed price will be determined.

The application period may not begin prior to the prospectus being approved by the SFSA and published. Thus, the application period is typically initiated when the IPO is publicly launched, ie, when the prospectus is launched together with a press release containing the price range, or a fixed fee, and size of the offer. The application period is often a couple of weeks long.

The decision on the IPO price, allocation and signing of the placing agreement (and lock-up undertakings) normally occur the day before the first day of trading. Then, on the first day of trading, pricing is announced through a press release. During the period from the first day of trading until the settlement date (normally two business days), trading in the issuer’s shares is normally made possible through share loans from the main shareholders. At the settlement date, trading becomes unconditional, meaning that the investors become the legal owners of the shares in question.

Costs

What are the usual costs and fees for conducting an IPO?

There are a number of fees to be paid by the issuer in connection with an IPO. Given the fact that Nasdaq Stockholm is the largest marketplace for equity securities in Sweden, the presentation below regarding fees to the exchange is focused on Nasdaq Stockholm. The normal listing fees for issuers on Nasdaq Stockholm are currently made up of a fixed fee and a variable fee. The fixed fee amounts to 900,000 Swedish kronor and shall be paid before the exchange initiates its processing of the listing application. The variable fee shall be paid after completion of the listing and is based on the average market capitalisation for the first month of trading. The fee is currently set at 200 kronor per market capitalisation million. The aggregate application fee is presently capped at 1,600,000 kronor. In the event a company cancels the listing process, an additional fee of 300,000 kronor will be invoiced. The issuer will also need to pay other fees to the exchange, such as a fee of 200,000 kronor for a one-year exchange auditor follow-up review and an annual fee of 48 kronor per market capitalisation million, based on the average market capitalisation for the previous year (the annual fee will, however, amount to a minimum of 205,000 kronor and a maximum of 3,105,000 kronor).

The fee relating to the SFSA’s review and approval process with respect to the prospectus is, at the date of this publication, 65,000 kronor.

The financial advisers typically receive a fixed fee, the amount of which varies but is often equal to a percentage of the sales price of all shares offered. In addition, there is often a discretionary fee (normally payable at the sole discretion of the issuer and the main shareholders), which may be based on, for example, a percentage of the aggregate sales proceeds. The issuer would normally be responsible for fees and expenses of legal counsels and other advisors involved in the IPO, as well as for other costs related to the IPO process.

Issuers are also subject to other costs, such as costs relating to affiliation to the central securities depositary (Euroclear Sweden AB).

Corporate governance

Typical requirements

What corporate governance requirements are typical or required of issuers conducting an IPO and obtaining a stock exchange listing in your jurisdiction?

The key corporate governance requirements are set out in the Swedish Companies Act (2005:551) (the Companies Act) and the Code. The Code forms part of the self-regulation of the corporate sector and sets out rules on, for example, the composition of the board of directors and nomination committee and remuneration of the board of directors and the executive management of an issuer. It is considered good stock-market practice for issuers with their shares admitted to trading on a regulated market to apply the Code. Consequently, issuers conducting an IPO on a regulated market must apply the Code from the time of completion of the IPO. The Code is, however, based on the principle of ‘comply or explain’, which means that there is no formal obligation for the issuer to comply with all of the rules of the Code at all times, as long as the issuer openly reports every deviation, describes the alternative solution it has chosen and explains its reasons for doing so. Failure to comply with the rules of the Code may, however, in some cases result in reputational damage. It is in most cases not mandatory for issuers looking to list their shares on an MTF to apply the Code. However, issuers seeking to list their shares on the premier segment of First North are required to apply the local corporate governance code in the country where the issuer is incorporated. It is also common for other issuers to voluntarily apply the Code.

As regards board composition, the Code stipulates that the composition of the board of directors is to be appropriate in relation to the issuer’s operations, phase of development and other relevant circumstances. Further, the board members shall collectively exhibit diversity and breadth of qualifications, experience and background. The issuer shall also strive for gender balance on the board of directors. Moreover, deputies for board members elected by the shareholders’ meeting are not to be appointed and no more than one elected member of the board may be a member of the executive management of the issuer or a subsidiary of the issuer. The Code further provides that the majority of board members shall be independent of the issuer and its executive management, and that at least two of the members of the board who are independent of the issuer and its executive management shall also be independent in relation to the issuer’s major shareholders. In this respect, the Code contains information on how to assess the independence of board members.

The Code also stipulates that the shareholders’ meeting shall establish a nomination committee for the purposes of proposing decisions to the shareholders’ meeting regarding electoral and remuneration issues with respect to board members and auditors and, where applicable, procedural issues for the next nomination committee. In addition, the Code stipulates that the board of directors is to establish a remuneration committee. The Code also includes rules relating to, for example, board procedures and requirements with respect to the chairman of the board of directors.

In addition to what is stipulated in the Code, it follows from the Companies Act that a company whose shares are admitted to trading on a regulated market shall have an audit committee for the purpose of, inter alia, monitoring the company’s financial reporting and making recommendations and proposals to ensure the reliability of the reporting. However, the company is not obliged to have an audit committee, provided that the board of directors performs the duties normally carried out by the audit committee. The members of the audit committee cannot be employees of the company and at least one member of the audit committee, or the board of directors, as applicable, must have accounting or auditing proficiency.

The prospectus that is to be drawn up in connection with the IPO is to contain information as to whether the issuer fulfils the requirements on corporate governance and, if that is not the case, an explanation of the reasons. Furthermore, pursuant to the Swedish Annual Accounts Act (1995:1554), issuers whose shares are admitted to trading on a regulated market are obligated to prepare an annual corporate governance report, either as a part of the management report included in the annual financial statements or as a standalone document. In practice, this obligation applies to all companies following the Code. The ‘comply or explain’ statement in relation to the Code will be included in the report. Information regarding corporate governance functions of the issuer and how the issuer applies the Code shall also be published on the issuer’s website.

New issuers

Are there special allowances for certain types of new issuers?

As already mentioned in question 11, it is considered good stock-market practice for issuers with their shares admitted to trading on a regulated market to apply the Code (ie, such issuers are to apply the Code). Given the ‘comply or explain’ mechanism on which the Code is based, there is, however, no strict requirement for issuers to comply fully with all of the standards of the Code.

Companies looking to list their shares on an MTF are in general smaller than companies seeking to get their shares admitted to trading on a regulated market. With the exception of issuers whose shares are listed on the premier segment of First North, there is no obligation for issuers whose shares are listed on an MTF to apply the Code, although many issuers do apply the Code voluntarily. In addition, the requirement to establish an audit committee, or alternatively, having the board of directors performing such committee’s duties (as set out in the Companies Act), does not apply to issuers whose shares are listed on an MTF.

There are no special allowances or similar for certain types of issuers with respect to corporate governance requirements.

Anti-takeover devices

What types of anti-takeover devices are typically implemented by IPO issuers in your jurisdiction? Are there generally applicable rules relevant to takeovers that are relevant?

Anti-takeover devices are rarely implemented by IPO issuers in Sweden. The Swedish Takeovers Act (2006:451) provides that if, due to information originating from the person who intends to submit a public offer for shares in the company, the board of directors or the managing director of a Swedish limited liability company whose shares are traded on a regulated market has legitimate cause to assume that such an offer is imminent, or if such an offer has been submitted, the company may only take actions to create less favourable conditions for the submission or execution of the offer as a result of a resolution passed by the shareholders’ meeting. Notwithstanding the foregoing, the company may seek alternative offers. The same applies with respect to companies listed on MTFs according to the Takeover Rules for Certain Trading Platforms issued by the Board. The requirement that the information regarding the offer is to give ‘legitimate cause to assume that an offer is imminent’ means that the information must be reasonably concrete and that the offeror can be assumed to have sufficient financial resources to implement the offer. The mere fact that the board of directors believes that the offer will not be sufficiently attractive to shareholders is not justification for the board to take its own measures against the offer. Measures the company may not take include, for example, a directed issue of shares, a transfer or acquisition of assets or an offer to the shareholders of the offeror company or another company for the acquisition of their shares. Whether these or other measures are covered by the provision depends on whether the measure in question is designed to impair the conditions for submission or implementation of the offer.

Foreign issuers

Special requirements

What are the main considerations for foreign issuers looking to list in your jurisdiction? Are there special requirements for foreign issuer IPOs?

A foreign issuer considering listing its shares in the Swedish market will naturally need to begin by deciding which marketplace is most suitable. Important factors that could affect such decision are, inter alia, the listing requirements of the marketplaces, continuous obligations and the type of investors that the issuer wishes to attract. A listing on Nasdaq Stockholm will normally attract the most attention from investors.

The IPO-related requirements for a foreign-based issuer to have its shares admitted to trading on a regulated market are more or less identical to those applicable to a Swedish issuer. With respect to the prospectus, an issuer based in the European Economic Area (EEA) may normally either prepare a prospectus to be reviewed and approved by the SFSA pursuant to the Trading Act, or prepare a prospectus and have it reviewed and approved by the competent authority of the issuer’s home member state and subsequently passported into Sweden. For an issuer that is based outside the EEA, it will be necessary to identify which EEA state is its home member state under the provisions of the Prospectus Directive. In the event that Sweden is deemed to be the issuer’s home member state, the SFSA has the responsibility of reviewing and approving the prospectus.

A foreign issuer whose shares are admitted to trading on a regulated market will, in order to comply with good stock-market practice, be required to apply the Code (and thus comply with the Code or explain any non-compliance thereof) or the corporate governance code in force in the country where the issuer has its registered office or the code applicable in the country in which its shares are also listed. If the foreign issuer does not apply the Code, it shall state which corporate governance code or corporate governance rules it applies and its reasons for doing so. It shall also report and explain the important aspects in which the issuer’s conduct deviates from the Code. Such explanation shall be provided in or adjacent to the issuer’s corporate governance report or, if no such report exists, on the issuer’s website.

Selling foreign issues to domestic investors

Where a foreign issuer is conducting an IPO outside your jurisdiction but not conducting a public offering within your jurisdiction, are there exemptions available to permit sales to investors within your jurisdiction?

There are a few exemptions pursuant to which sales may be made to investors within Sweden in connection with an IPO conducted outside Sweden (without there being a public offering conducted in Sweden), of which the most relevant are:

  • where the offering is directed solely towards qualified investors (the definition of which is set out in the Trading Act and the Securities Markets Act);
  • where an offering is made to fewer than 150 people (other than qualified investors) per EEA state;
  • where an offering amounts to at least €100,000 per investor or where the nominal value of the securities offered amounts to at least €100,000; and
  • where the aggregate amount to be paid for the securities relating to an offering corresponds to a maximum of €2,500,000 during a period of 12 months.

Tax

Tax issues

Are there any unique tax issues that are relevant to IPOs in your jurisdiction?

In Sweden, neither the issue of new shares that is normally a part of an IPO nor any transfer of shares (whether subsequent to the IPO or as part of a secondary offering) will result in any stamp duty or similar tax being levied.

Investor claims

Fora

In which fora can IPO investors seek redress? Is non-judicial resolution of complaints a possibility?

An IPO investor can seek redress through filing a claim with the courts of Sweden. A non-judicial resolution would be a possibility only if the claim is settled.

Class actions

Are class actions possible in IPO-related claims?

The Swedish Group Proceedings Act (2002:599) enables class actions in IPO-related claims. However, such class actions, which could be described as ‘opt-in’ class actions, are not commonly used as a dispute-settling method in Sweden in general. The procedure for joint adjudication of similar cases under the Swedish Code of Judicial Procedure (1942:740) is more frequently used to settle disputes involving several claimants, and is thus of more significance. The Code of Judicial Procedure and case law on joint adjudication adopt a rather liberal approach to joint adjudication of similar cases brought by several claimants. Because joint adjudication is governed by the provisions of the Code of Judicial Procedure, the same rules apply as for individual civil cases. To date, no IPO-related case has been adjudicated applying the Group Proceedings Act.

Claims, defendants and remedies

What are the causes of action? Whom can investors sue? And what remedies may investors seek?

With respect to IPO-related investor claims, the adequate causes of action would be to sue sellers of existing shares for damages on contractual grounds, to sue the board of directors or the managing director of the issuer for untrue statements or omissions in the prospectus or in advertisements or, in exceptional cases, to sue any of the afore­mentioned persons for damages asserting the fraud rules of the Swedish Penal Code (1962:700).

Under the Companies Act, a founder, director, managing director or auditor of a company who, in performing his or her duties, intentionally or negligently causes damage to the company must pay compensation for that damage. If a company has prepared a prospectus in accordance with the Trading Act, the same applies to damage resulting from contravention of the prospectus rules of the Trading Act or of the Prospectus Regulation.

There is uncertainty as to whether under Swedish law the issuer can be held liable to pay damages to investors due to untrue statements or omissions in the prospectus.

Update and trends

Key developments

Are there any other current developments or emerging trends that should be noted?

Recent developments20 Are there any other current developments or emerging trends that should be noted?

During 2017 and early 2018, there was a notable trend of many IPOs being conducted in the form of dual tracks and, in connection therewith, many companies being sold privately and thus never reaching the stock market. This trend has continued throughout 2018 and early 2019, and may to a certain extent explain the decreasing number of IPOs in the Swedish market during 2018.

On 20 July 2017, a new EU Prospectus Regulation ((EU) 2017/1129) (the New Prospectus Regulation) entered into force. The New Prospectus Regulation will apply in its entirety as of 21 July 2019 (although some provisions apply already as of 20 July 2017 and 21 July 2018). This regulation replaces the Prospectus Directive in its entirety, as well as certain provisions in Swedish national legislation.

Law stated date

Correct on

Please state the date on which the law stated here is accurate.