SWEDEN: An Introduction to Capital Markets: Equity

Introduction

The Swedish equity capital markets (ECM) are the fastest growing equity market in the EU, the third largest by capitalisation and the single largest equity market by number of listed companies. Combined with a strong and rapidly expanding bond market over the past decade, the Swedish ECM has shown itself to be exceptionally strong and is often mentioned as a top performer in the EU. This success story is supported by a stable and innovative regulatory framework which involves a high degree of self-regulation. Together with a corporate sector that is at the forefront of corporate governance and sustainability, Swedish ECM positions itself as a benchmark-setter and remains an attractive option for both private and institutional investors, offering a stable and growing equity market.

2024: A Year of Recovery

With improving macroeconomic trends following a period of high inflation, equity markets, including IPOs, have rebounded in Sweden during 2024, marking it as a year of recovery. Looking back, 2024 saw an increase in the number of IPOs and takeover offers, with the Swedish Securities Council reporting a record year in terms of number of cases. Nasdaq Stockholm alone saw 46 new listings with companies raising a total of EUR15.7 billion in proceeds. Notable listings include Sveafastigheter, a Swedish real estate conglomerate, raining EUR300 million in its primary listing, as well as Apotea, Sweden’s premier online pharmacy, welcoming over 90,000 new shareholders to the company.

Although the Swedish economy in many ways mirrors global trends and is highly influenced by global macroeconomic events, over time, the Swedish ECM has demonstrated a distinctive level of resilience. This market strength is underpinned by a strong underlying investment culture among Swedish households and a significant presence of domestic long-term institutional investors, the latter often taking an active role in governance. Looking ahead, we expect the upward trend in IPO and ECM activity to continue with sustained growth in 2025, further accelerated by a shift in restored investor confidence, lower interest rates, a historically low Swedish krona, and improved access to capital.

Legal and Regulatory Developments and Trends

ESG reporting

ESG considerations continue to shape the Swedish ECM, driven by increasing EU regulatory requirements, such as the EU taxonomy and the recent entry into force of the Corporate Sustainability Reporting Directive (CSRD). The CSRD extends disclosure obligations and includes new rules on ESG reporting for companies listed on a regulated market, including mandatory sustainability reports as part of the annual reports process. These changes stem from the EU’s ambition to promote sustainable investments while simultaneously enhancing transparency on the management of financial risks arising from climate change and social inequalities. This aligns with the development of ESG metrics becoming an increasingly significant investment criterion for companies and investors alike.

However, the growing regulatory burden has raised concerns among businesses. In response, the European Commission announced plans in late 2024 for an omnibus package on sustainability, aimed at simplifying sustainable reporting and the taxonomy, including the CSRD. The goal is to the reduce regulatory and administrative burden on firms and enhance the EU’s global competitiveness.

Foreign direct investment (FDI) regime

Sweden has traditionally maintained a regulatory environment that is friendly to foreign investment. Through the introduction of the Swedish FDI regime on 1 December 2023, extensive scrutiny has been imposed on foreign direct investments. The regime’s scope extends not only to possession of controlling stakes but also to non-controlling minority investments in Swedish entities conducting protection-worthy activities such as:

• essential services;
• security-sensitive activities;
• processing of sensitive personal data or localisation data;
• manufacturing or provision of dual-use items;
• emerging technologies; and
• other strategic technologies.

The regime’s applicability is independent of the investor’s nationality; however, restrictions may only be imposed on investments from non-EU individuals and entities registered outside the EU or controlled by non-EU entities or natural persons.

With the FDI regime now having been in force for over a year, it has become a key consideration in equity investments that may require regulatory approval. During this time, market participants have gained a better understanding of how the regulator has applied pre-investment screening, leading to greater predictability for international investors and increasing deal certainty. Nevertheless, some investors have sought voluntary notification to mitigate transaction risk and to reduce deal uncertainty, with the consequence of increased transaction costs.

Improved access to equity capital markets

In line with the aim of the Capital Markets Union to improve access to market-based sources of financing, the EU has introduced the Listing Act. This has spurred hopes of incentivising further ECM activity and may pave the path for a new trend of easing regulatory requirements. The Listing Act includes significant amendments to the Prospectus Regulation and Market Abuse Regulation. The Listing Act primarily aims at alleviating regulatory burdens that apply to IPOs and capital raises. Notably, it introduced a new 11-page document, which replaces the need to issue a prospectus when carrying out rights issues in certain cases, streamlining the issuance process and cutting costs.

Additionally, Nasdaq Stockholm introduced updates to its Main Market rulebook for 2025, facilitating dual listings with US exchanges. The new framework eliminates redundant reviews by listing auditors for companies already approved for a US listing, making the process more efficient and attractive for international companies.

Reduced self-regulation and increased regulatory oversight

While there is a clear ambition within the EU to ease regulatory requirements and improve access to capital, there is nevertheless a trend towards increasing requirements on capital markets actors. This development stands in stark contrast to the Swedish model of self-regulation on the stock market, which has arguably been one of the key factors for Swedish ECM’s flexibility and success, potentially having an adverse effect on future growth prospects.

In parallel with this development, authorities are intensifying regulatory oversight and increasing scrutiny of market actors. For instance, in 2024, two former CEOs were, pending appeals, convicted of communicating misleading information to the market through interviews and quarterly reports. This move towards increased legislative interference, through legislation such as the FDI regime and EU taxonomy, alongside more active regulatory oversight from authorities, is steadily changing key aspects of the Swedish ECM’s foundational success. The long-term implications of these developments remain to be seen.

Key Takeaways

1. Sustained economic outlook: The economic situation in Sweden has rebounded from the recent high-inflation years, and is set to keep improving during 2025, bringing forth greater investor confidence and new access to capital.
2. Transparency and ESG requirements: Increased transparency and stricter ESG requirements, driven by EU regulations like the CSRD, are shaping the Swedish ECM, encouraging sustainable investments and enhanced reporting on climate and social risks.
3. Improved regulatory landscape: While regulation has increased over the last couple of years, through, for example, the FDI regime, the next few years could see a shift towards deregulation. The planned introduction of the omnibus package, which includes reforms to ease CSRD requirements, is one such initiative aimed at significantly reducing the regulatory and administrative burden on corporations, ultimately enhancing the EU’s competitiveness.