Adam Kostyal

Nasdaq First North has an important role to play in supporting innovative companies, and providing exciting opportunities for investors, providing they understand the risks, the head of European listings at Nasdaq tells Marie Kemplay.

Nasdaq First North, part of Nasdaq European Markets and a marketplace for growth companies, has already passed several important milestones in its 17-year history. Following the model established by London’s Alternative Investment Market, First North applies more flexible listings rules to enable smaller companies to access the public markets without facing the same requirements that a Main Market listing would entail. 

Launched in 2005, it includes listings on the Stockholm, Copenhagen, Helsinki and Iceland exchanges. And in 2009 it launched its Premier Market segment, designed as a stepping stone towards a Main Market listing, with higher disclosure and accounting standards than the usual First North requirements. In 2021, it hit the landmark of more than 100 companies making the jump from the First North Growth Market to a Main Market listing. That tally is now 109. 

“Growth markets have a key role in supporting smaller companies to access the public markets, in a responsible way, giving them a platform for growth, and enabling them to evolve over time so that they can reach even more investors,” says Adam Kostyál, senior vice-president, head of European listings, Nasdaq. 

Taking inspiration 

Mr Kostyál believes the investment ecosystem which has developed within the Nordics has played an important supporting role in encouraging companies to list on the public markets. “We have seen a positive spill-over effect from one market into another, across the exchanges we operate,” he says. 

“When we saw the Swedish markets growing, it created an inspirational dynamic. Not only were investors and advisers developing their understanding of how to work with smaller initial public offerings, regulators were also considering how they could support this dynamic.”  

Mr Kostyál cites, for example, the 2012 launch of investment savings accounts, where savers do not pay capital gains on investments and instead pay a set rate of tax, as an important development: an approach that has since been copied by Denmark and Finland (albeit with their own specific rules). 

The pandemic, of course, fuelled retail participation on a global level, but having that tax and regulatory structure in place was a really important enabler and supported further growth

“The pandemic, of course, fuelled retail participation on a global level, but having that tax and regulatory structure in place was a really important enabler and supported further growth,” he says. 

Mr Kostyál adds that as retail participation in the markets has grown, so has the importance of increasing understanding of the realities of what investing in growth companies, of the sort listed on First North, entails. “Investing risk capital, during the earlier stages of growth for companies, is that bit more volatile and unpredictable. But I think there is sometimes a misconception that this reflects the quality of the company. And this is a misconception because you cannot measure the quality of a company based on short-term performance, it has to be performance over time,” he explains. 

There is, he says, sometimes too much of a focus in the media discourse on the short-term health of companies when “these companies have long-term plans and will build up their presence over time”. 

Opportunity knocks 

For investors active in the market now, Mr Kostyál sees a clear opportunity to invest in companies and technologies that are going to drive the economy of the future. “You’re looking at sectors such as cleantech and biotech,” he says. He adds that this creates the potential “to gain value through this innovation and to be a part of driving fundamental changes in society”, but he says investors also need to be aware “that it could be a bumpy ride and there will be challenging periods”.  

Despite the higher risks for investors related to growth companies, Mr Kostyál firmly believes the public markets have a vital role in their financing. “Venture capital cannot always be the solution. It’s important that there is a well-balanced ecosystem, which allows companies to choose the optimal way of financing for them,” he says. The additional scrutiny that comes from companies seeking finance in the public context also plays an important role, he believes, in keeping markets functioning well: “The fact that some deals fail is a healthy thing.”  

In the long term, these small companies could also one day become the major players of the future. “If they do not have the opportunity to join the public markets, they could remain in the private space and public pension funds will not have the opportunity to invest in them,” says Mr Kostyál. 

But with increased risk, often comes increased reward. Mr Kostyál is keen to point out that the First North Index has consistently outperformed the Main Market over several years. “Some of these companies are fantastic growth stories,” he adds. 


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