Pre-IPOs, a new pathway to early funding for growing businesses. ABGSC’s Erik Skog explains the benefits

In recent years, pre-IPOs have become an increasingly appealing alternative for institutional investors. As most institutional investors, such as mutual funds and pension funds, are mandated to predominantly invest in publicly traded equity, they are often shut out of opportunities in strong, unlisted growth cases. A pre-IPO is an investment in a company that has a board decision to go public, but in which it has been concluded that the company has better potential to grow in the near-term within a non-listed environment.
Erik Skog at ABG Sundal Collier believes that the reason for the growing interest in pre-IPOs is twofold:
“For investors, this is often a great investment opportunity. The potential value creation is naturally higher if you have the chance to invest in a company at an earlier stage. For the entrepreneurs, it’s a chance to access capital without prematurely directing resources to an IPO”, he says.
It is a big step for any organization to go through an IPO process and a big commitment to become a listed company, with extensive requirements regarding disclosure, compliance, as well as organisational and legal structures.
“A company often needs to reach a certain degree of maturity to become listed. If you rush an IPO, you may take the focus away from growing your business. In those cases, a pre-IPO may be a good way to raise capital”, Erik Skog says.
According to Erik Skog, an IPO needs to be relatively sizeable in absolute amounts to attract tier 1 investors, whereas a pre-IPO is not constrained by the same size requirements. For entrepreneurs on a growth journey, an early IPO may result in higher dilution and less control of the company, compared to what a pre-IPO could offer.
“For many companies it would be better to take in less capital through a pre-IPO process first and use the capital to scale up the business prior to the full IPO”, Erik Skog explains.
For ABG Sundal Collier, as a leading Nordic investment bank, being involved in pre-IPO processes means that it can commit to a long-term relationship with its clients, taking them through several stages in their business cycle. This is very much in line with our mission to enable companies and capital to grow and perform.
“We would rather not be the kind of advisor that just does one transaction, shake hands, and then say goodbye. We want to be a long-term financial partner, simply because we believe it is good business for us and for our clients. The better you know your client, the better advice you can offer”, Erik Skog explains.
ABG Sundal Collier has recently advised a large number of companies including X Shore, Charge Amps, Fishbrain, Readly and XNK in pre-IPO financing rounds.
“Some of these companies are driven by mega-trends such as ESG, digitalisation and electrification, for which it is crucial to grow and get a significant piece of the market now, in order to secure long-term profitability. For many of those companies, a pre-IPO is a smart option”, says Erik Skog.
Read more about some recent transactions here:
ABGSC acted as sole global coordinator and bookrunner in the capital raise of more than SEK 150 million in X Shore
ABGSC acted as sole global coordinator and bookrunner in the pre-IPO private placement of SEK 150 million in Charge Amps
ABGSC acted as sole financial advisor to Fishbrain in its USD 31 million financing round
On 27 May, ABGSC is hosting a pre-IPO seminar. Find out more here