Photographer: Freya Ingrid Morales/Bloomberg

IPO Fest Puts Copenhagen in Big League as Offshore Cash Flows In

The man in charge of Nasdaq OMX in Copenhagen says the Danish capital is proving a surprising magnet for some of this year’s biggest public listings.

Dong Energy A/S’s June initial public offering was the largest in Europe since 2013, while Nets A/S was the region’s biggest fintech IPO, according to Nasdaq records. Copenhagen was also the bourse chosen by Scandinavian Tobacco Group A/S when it went public in February.

Bjørn Sibbern, president of Nasdaq OMX’s Copenhagen operations, says investors looking for a safe place to chase returns are increasingly turning to Denmark and other Nordic bourses. Much of the demand comes from a sense of unease caused by the U.K.’s decision to quit the European Union, with equity investors sending more cash into the Nordic region to escape the fallout of Brexit, he told Bloomberg.

“It’s difficult to predict the future when it comes to IPOs, but on the demand side it’s clear that investors are looking to safe havens like the Nordics post-Brexit and they are looking to place in the equity space when interest rates are at their current levels,” Sibbern said. That demand has created a “sweet spot” for issuers, he said.

Nasdaq estimates that offshore brokers now contribute more than half the liquidity (about 60 percent) in Nordic stocks. The interest from outside has helped drive an increase in daily equity turnover in Copenhagen to 5.4 billion kroner ($815 million) in 2016 from 2.4 billion kroner in 2012.

But amid all the fanfare, it’s worth noting a few ripples. Nets, a payments processor that went public two weeks ago, has since traded lower than its IPO price. The company’s stock lost 2.2 percent on Wednesday and traded 0.6 percent lower as of 2:35 p.m. local time on Thursday, bringing its declines since the IPO to more than 6 percent. Investors would have done better buying Denmark’s negative-yielding benchmark five-year bond.

That’s led to considerable “disappointment” among many investors, according to the Danish Shareholders Association. The group has questioned whether the pre-IPO hyperbole resulted in Nets being sold at too high a price. Deutsche Bank AG, Nets’s stabilization manager, intervened for three consecutive days after the shares started trading to support the price, according to the latest regulatory filings.

And Copenhagen was the site of one of Europe’s most awful IPOs in recent history, when OW Bunker A/S went bankrupt in 2014. The ship-fuel provider had gone public just eight months earlier.

This year, Copenhagen’s benchmark index of Denmark’s most-traded stocks has lost more than 20 percent, roughly as much as the Stoxx Europe 600 index over the same period. The MSCI Europe index is down about 7 percent.

Copenhagen’s biggest IPO prize is bucking that trend. Dong Energy, which is transforming itself into a renewable energy provider as it scales back its fossil fuel operations, has gained almost 20 percent since its June listing. Scandinavian Tobacco Group is up almost 15 percent.

British IPO activity slumped ahead of the June referendum, with volumes down 51 percent in the first half. To be sure, the FTSE 100 Index has gained about 11 percent since the vote, as export companies have been helped by a weaker pound.

Nykredit A/S might be Copenhagen’s next big IPO as Denmark’s largest mortgage lender targets a public sale by 2018. But as Sibbern says, “it’s always difficult to predict” what the pipeline holds.

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