Raising capital for Finnish IT SMEs through IPOs

Abstract

This is a research-based thesis that aims to point out the possibilities for Finnish IT SMEs to generate capital through an initial public offering, i.e. IPO. Information technology companies usually need a significant amount of capital, e.g. for their R&D, so that they can improve their products or services and satisfy customers. In addition, European Union has encouraged companies, especially SMEs, to join the public equity market.

The research consists of theoretical knowledge regarding different kinds of equity financing, especially regarding IPO, and general overview of recent development of Finnish stock market, i.e. NASDAQ OMX Helsinki, as well as of Finnish IT SMEs. In addition, the research also provides two case studies of two public Finnish IT companies: one is listing on the Main Market of NASDAQ OMX Helsinki, and another one is listing on First North in Helsinki.

The final result of this research suggests that only later-stage SMEs that already have attractive products or services and an excellent management team should consider an IPO. Furthermore, a promising market condition is also necessary. NASDAQ OMX Helsinki has not been so active but First North in Helsinki has recently developed and attracted new listings since 2014. In order to succesfully transform to a public company, a SME should pay attention to a variety of risks, including compliance, operational, strategic, and financial ones. In Finland, there are approximately 51 potential IT SMEs that can engage in public equity market. If they think of IPO as a method to generate more capital, they should initially evaluate their business and consider the advantages and disadvantages of the IPO. Post-IPO operations are also very important because they strongly affect company’s credibility and investors’ attitude.