Norway’s previously obscure Merkur Market has grown astronomically in 2020, with 40 companies executing fast-tracked listings on the unregulated multilateral trading facility so far – up from just three last year.
More significantly and in a boon for Nordic banks, about 20 companies raised more than US$50m-equivalent each in the process. No companies raised more than US$50m on the bourse in 2018 and 2019.
“We did not expect this activity,” said Oivind Amundsen, president and CEO of Oslo Bors, which owns the Merkur Market. “We thought 2020 would be an OK year, but now we could end up with around 50 listings on the Merkur Market, which is more than triple the number of listings last year across both the Merkur and main exchange.”
The Merkur Market, which began life in 2016 and is named after Mercury, the Roman god of trade, will soon be rebranded as a Euronext Growth market, a worthy evolution to wrap up a year of unprecedented progress.
Oslo Bors, acquired by Euronext in 2019, also hosts the Oslo Axess market that fits between the main bourse and Merkur, and Norway’s OTC market, through which unlisted shares can be traded.
But with no prospectus requirement, a mere 15% free-float threshold and a speedy process of as little as two weeks from admission to trading, a Merkur listing is unique.
“It’s been a volatile market this year, so companies wanted to execute transactions quickly when the market was there,” said one Nordic banker involved in several Merkur listings. “The registration process on Merkur has made it possible to focus on the capital raise first and then do a swift listing.”
By November 24, Merkur listings had raised around NKr19bn (US$2.1bn), well ahead of US$1.3bn of IPOs on the main market even after last week's float of wind turbine maker Cadeler. As it stands, Merkur Market issuance is almost five times more than the previous record set in 2017.
Aker paves the way
In June 2020, Oslo-listed holding company Aker carried out the largest Merkur Market listing to date, floating its krill supplier subsidiary Aker BioMarine and raising NKr2.15bn (US$225m) in an institutional bookbuild.
“The Aker BioMarine listing is the key to understanding this trend – they activated the market with that transaction,” said a second Nordic banker away from the deal. “After that it exploded as people realised that the marketplace works.”
Arctic Securities, DNB Markets and SEB were bookrunners on the Aker BioMarine listing.
Aker’s solid reputation boosted market confidence and other large Merkur deals soon followed, including plastics recycling company Quantafuel’s NKr777m September IPO and green tech company Volue’s listing, which raised NKr1bn in October.
Aker also went on to spin-off and list two more subsidiaries: Aker Carbon Capture and Aker Offshore Wind.
Seafood, green energy and IT and healthcare companies have dominated, reflecting Norway’s wider economy. Other local Nordic banks including Carnegie, ABG Sundal Collier, Nordea, Pareto and SpareBank1 Markets made appearances as bookrunners on Merkur listings in 2020.
Although aftermarket performance for Merkur listings has been a mixed bag, a few major successes stand out.
As of last Friday at midday, shares in software company Mercell and green energy company HydrogenPro were both trading about 70% above initial pricing. Shares in cloud data platform provider PatientSky were about 50% up, while shares in green tech company Volue’s were about 16% higher than IPO pricing.
In contrast, a tricky week at the end of October saw shares in air monitor producer Airthings and Kalera tumble 26% and 27% respectively on their debuts, which one banker attributed to market fatigue. By last Friday at midday Kalera shares were still 16% under IPO pricing while Airthings had recovered to about flat to IPO pricing.
Several sources mentioned pent up demand for new issues as a driving force behind the flurry of Merkur listings and capital raises, with Nordic investors sitting on cash after a quiet few years for local small cap issuance.
“Many of these companies weren’t planning IPOs,” said the first banker. “They have accelerated their listing plans because the window was there. It’s like a new market opening up, and it is frequently an alternative to the companies being bought by private equity.”
In the fast lane
The deals typically launch with cornerstone backing, which further fuels demand. Final books have in some cases totalled hundreds of lines, with some reaching as much as 400 lines, and have drawn a much higher level of domestic participation than a typical Nordic IPO, according to the banker.
That distribution is even more impressive considering books are normally only open for two days or less.
“After 2008 we saw a need for lighter and quicker ways to go public than the more regulated markets”, said Amundsen.
The process of listing on the Merkur can take as little as two weeks. Factoring in investor engagement in the lead up, the whole process can be four to six weeks, significantly less than the typical four to six months needed to carry out a full IPO.
Investors are typically engaged in early look meetings where anchors or cornerstones are secured. A short institutional bookbuild follows, with no retail component, as is the case with other listing destinations like London but unlike a normal Nordic float.
According to the second banker, the company usually waits until the bookbuild is wrapped up to submit documentation for approval by the stock exchange, an aspect that has caused some friction. In one specific case, investors were not informed of the extent of IPO bonuses for company management until after the document was approved, the banker said.
“In a normal IPO, you publish the approved documents first then you do the bookbuild, here it’s the other way round,” said the banker. “Due to this I think the marketing method will migrate towards a normal stock exchange listing, including earlier engagement with the stock exchange.”
Several Merkur-listed companies indicated that they aim to upgrade to a main Oslo listing within a year, presenting the listing as a transitional stepping-stone towards completing a full IPO.
“Even in more normal times, it was becoming more popular to do a transition before an IPO – for example to list on an OTC market, or raise funds privately,” said Amundsen. “After this year the Merkur has got a good reputation. For a lot of these companies the end game will be the main listing, and they will transfer easily.”
|Merkur Market||Oslo Axess||Oslo Stock Exchange|
|Minimum market cap||No minimum||NKr8m||NKr300m|
|Prospectus required?||No, admission doc only||Yes||Yes|
|Financial reporting||IFRS or GAAP||IFRS||IFRS|
|Listing fees||NKr120,000–NKr647,000 (NKr1.1m fixed for fast track admission)||NKr514,000–NKr1,180,600||NKr772,000–NKr1,299,000|
Corrected story: Corrects Merkur free-float requirement