Icelandic companies are rushing to raise money and sell shares to local public as the government prepares to remove capital controls.
Reitir hf, a real estate company, this week started trading after Iceland’s biggest initial public offering since the 2008 crisis, when measured by market capitalization. The company was the first of at least three planned IPOs this year on the Nasdaq Group OMX Inc. Reykjavik exchange.
Capital controls trap about $5.3 billion in assets on the island, which are now boosting the local stock market and have also triggered a surge in home prices. Reitir became the 15th company on the exchange, up from just seven in 2010. The exchange had 75 companies 16 years ago.
“When and if the capital controls are lifted there’s a chance that some of the money invested in the equities market will leave the economy,” Gudjon Audunsson, chief executive officer of Reitir, said in a telephone interview. Still, Iceland’s pension funds and other investors “will also need to keep a share of their investments in domestic assets which limits the risks of great outflows,” he said.
Arion bank hf sold about 13 percent of Reitir in an IPO valuing the entire company at about 50 billion kronur ($370 million). The shares rose 0.3 percent to 64 kronur as of 11:18 a.m. local time.
“We believe that this is the ideal way to offload shares, when the conditions are favorable,” Haraldur Gudni Eidsson, a spokesman for Arion, said in an interview.
While Iceland’s decision to impose capital controls has helped the economy return to growth, removing the restrictions has turned out to be a struggle. The government has repeatedly delayed the removal of the controls, originally slated to be only “temporary.” Finance Minister Bjarni Benediktsson last month said he “hopes” for large steps in controls’ removal by the end of June.
“My feeling is that the investors that are locked behind the capital controls now are growing more patient then they may have been before,” said Audunsson. “Therefore, I’m not too concerned of massive, uncontrolled outflows of capital following the removal. As a safeguard, those wanting to leave quickly should be taxed through an exit tax quite heftily.”
Arion, owned by the creditors of failed lender Kaupthing Bank hf, still has an 8.7 percent stake in Reitir after the IPO. State-owned lender Landsbankinn hf, the successor to failed lender Landsbanki Islands hf, holds 17.8 percent.
Reitir also listed bonds Thursday at a nominal value of 25 billion kronur, the largest listing on the exchange when excluding bank bonds.
Arion will list two more companies this year, according to Eidsson. It will float Eik fasteignafelag hf later this month Siminn hf before the end of the year, he said.
“By listing the shares of companies, we facilitate the rebuilding of the equities market in Iceland and expand the range of investment possibilities,’ he said.’