Nasdaq’s junior stock exchange has secured legal approval to offer UK investors tax breaks for investing in its Nordic markets, ramping up its challenge to London following the UK’s vote to leave the EU. Nasdaq First North, an exchange for small growth companies available across cities including Stockholm, Helsinki, Copenhagen and Reykjavik, is the first market outside the UK and Ireland to be granted “growth market status” by HM Revenue & Customs. The approval will allow UK-based investors to receive tax exemptions when they invest in UK companies listed on the exchange. The new status is a boost for Nasdaq First North as it tries to lure British companies and investors away from their local London market to the burgeoning Nordic equities market and, more broadly, attract international companies that want to list in Europe. The UK’s equivalent, the Alternative Investment Market, has held the status since 2014.
Aim has long been established as Europe’s main venue for emerging and lighter-regulated stocks, outlasting competitors such as Germany’s Neuer Markt. This year it reached £100bn of capital raised since its launch in 1995. Adam Kostyál, senior vice-president and head of European listings at Nasdaq, said Nasdaq First North was pushing to position itself as a “strong alternative” to Aim. “This will be part of a game-changing process in terms of making this market more internationally recognised and accessible for investors,” he said. From an international point of view, looking at London, uncertainty is not an ideal factor when evaluating a possible IPO ADAM KOSTYÁL, HEAD OF EUROPEAN LISTINGS AT NASDAQ The exchange, launched in 2006, said it had gained traction with international investors following the UK’s Brexit vote, pointing to a recent increase in the number of initial public offerings.
In 2016 Nasdaq First North hosted 51 IPOs, compared with 39 on Aim, according to data from PwC. This compared with 46 IPOs in 2014, versus 81 for its London equivalent. “You have the uncertainty of what will the impact of a hard or a soft Brexit be and you have the uncertainty of the capital markets in terms of attracting flow,” Mr Kostyál said. “From an international point of view, looking at London, uncertainty is not an ideal factor when evaluating a possible IPO.” While still a nascent market — it is home to about 300 companies compared with roughly 960 Aim companies — Nasdaq First North has grown rapidly in recent years. Since the beginning of 2016 it has raised €1.1bn. Still, Aim dwarfs First North in terms of the number of secondary offerings it hosts and is more mature as a market. The average market capitalisation of its newly listed companies at IPO was $111m in the first half of 2017, according to data from Dealogic, compared with $63m in First North’s Stockholm market, its most popular.
Aim has been working to strengthen its reputation after a number of scandals, such as the break-up of software insurer Quindell. The LSE has launched a consultation on the market with a view to improving due diligence requirements and corporate governance standards for its new companies. Last month it emerged that on average there are nearly 200 alleged rule breaches on the market each year.