It Is Becoming Cheaper to Take Your Company Public – But the Real Obstacle Was Never the Prospectus
For many years, Swedish growth companies have found themselves in a rather unusual position.
Politicians, regulators and business organisations have long emphasised the importance of increasing access to capital and encouraging more companies to enter the public markets. Yet Sweden has continued to apply one of the more restrictive prospectus thresholds permitted under the EU regulatory framework.
As a result, companies seeking to raise relatively modest amounts of capital have often found themselves facing an expensive and administratively burdensome prospectus process.
That is now changing.
Sweden is increasing the threshold for mandatory prospectuses from EUR 2.5 million to EUR 12 million over a twelve-month period, which represents the maximum level permitted under EU rules. For many companies, this change could make access to the capital markets both faster and more cost-effective.
The more interesting question, however, is not whether prospectus costs will decrease. The more interesting question is which companies will actually benefit from the change.
Sweden Has Long Been More Cautious Than Necessary
Preparing a prospectus is not merely a legal formality. It requires significant input from management, auditors, issuing agents and legal advisers. For smaller companies, the cost can represent a substantial proportion of the capital being raised.
That is why Sweden’s previous threshold of EUR 2.5 million has often attracted criticism.
Not because investor protection is unimportant. Rather because the threshold risked having the greatest impact on precisely the companies that capital markets are intended to attract: small and medium-sized growth businesses.
By increasing the threshold to EUR 12 million, Sweden is doing more than implementing a technical regulatory amendment. It is signalling a different approach to how the capital markets should function.
Not All Listings Will Be Affected Equally
It is important to understand that the reform will not affect all companies in the same way.
For companies seeking admission to trading on Nasdaq Stockholm, relatively little changes. Nasdaq Stockholm is a regulated market. A prospectus will continue to play a central role in the listing process. The prospectus must be reviewed and approved by the Swedish Financial Supervisory Authority (Finansinspektionen), while Nasdaq will continue to conduct its own listing assessment.
For these companies, the prospectus remains a fundamental part of the listing process itself.
The most significant practical impact will instead be seen on growth markets such as Nasdaq First North Growth Market, Spotlight Stock Market and Nordic SME. Companies seeking admission to these markets have already been able, in certain circumstances, to use a company description rather than a full prospectus. As the prospectus threshold increases, more transactions can now be structured within that framework.
For a growth company planning to raise between SEK 50 million and SEK 100 million, the difference can be substantial, both financially and in terms of execution time.
A Simpler Listing Process
The reform undoubtedly simplifies the listing process.
However, for companies that are genuinely ready for the capital markets, the prospectus has rarely been the primary obstacle.
The real challenges are usually found elsewhere, such as the ownership structure is not fully resolved, management incentive schemes require review or historic investments have not been properly documented. Or maybe the commercial agreements lack key provisions or intellectual property rights have not been fully assigned to the company.
In practice, these are the issues that delay listings, fundraising transactions and investment processes. The prospectus often reveals the problems. It rarely creates them.
The Biggest Winners Will Be the Best-Prepared Companies
The greatest beneficiaries of the new rules are likely to be the companies that have already done the groundwork. Companies with clear ownership structures, with well-organised corporate records, which understand how investors, exchanges and market operators assess risk are the winners.
For these businesses, the new rules lower one of the administrative barriers to accessing the capital markets. Sometimes that is enough to make the difference between postponing a listing and proceeding with one.
English Becomes a Natural Language of the Capital Markets
Another change that may prove more significant than many initially realise is the ability to prepare prospectuses in English. Historically, Swedish regulations have often assumed that Swedish investors were the primary audience. Today’s reality is very different. Investment capital is international.
Investors compare opportunities across jurisdictions, and for many institutional investors English is the natural working language.
The ability to prepare prospectuses in English therefore represents more than a linguistic change. It signals a further alignment of the Swedish capital markets with an increasingly international investor environment. For companies with global ambitions, this may reduce barriers to attracting foreign investment and simplify communication with prospective investors.
Conclusion
It is easy to describe the reform as a prospectus issue. In reality, it represents something broader. Sweden is signalling that smaller and medium-sized companies should have easier access to the capital markets than they have had in the past.
That is likely to be a positive development. However, no entrepreneur should mistake a simpler rulebook for a simpler listing process. The capital markets will continue to ask the same fundamental question they have always asked:
Is this a company that investors can trust?
That remains the point at which most listing processes ultimately succeed or fail.
Forsety Legal advises entrepreneurs, startups and growth companies throughout the listing process on Nasdaq Stockholm and all major Swedish MTF marketplaces. If you are considering an IPO or admission to trading and would like to discuss which market is most suitable for your business, we would be pleased to arrange an initial consultation without obligation.
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