Record stock exchange year brought out small investors and new companies

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CEO of Nasdaq Tallinn Kaarel Ots. Source: Siim Lõvi /ERR

The Estonian arm of Nasdaq's Baltic services saw its record for the number of transactions crushed over the last year, leading to an influx of small investors and Estonian companies taking themselves to the public market.

In 2020, the number of transactions on Nasdaq Tallinn's exchange grew more than fivefold. The number of accounts with at least one stock registered also grew: from 37,000 in 2019 to 45,000 by the end of 2020, said Kaarel Ots, chairman of the Nasdaq Tallinn management board.

He said peoples' financial literacy has developed and there are more and more small investors.

"I dare say the main reason is that two banks - Swedbank and LHV - gave up transaction fees. We saw how it affected the number of small deals in particular. The development of financial literacy and investment culture is very important, letting people try one stock at a time to see how it goes," Ots said.

According to the Nasdaq Tallinn CEO, there are more retail investors on the exchange than ever. Demand has been met with sufficient supply and there are more companies on the exchange than ever with the list still growing.

"There was one small company that joined the exchange last year - Saunum Group. Their example is that of many - we have had more meetings with companies planning to go public in the last couple of weeks than last year in total. Saunum showed that a small company that does their job well, is transparent, simple and understandable, can achieve great success," Ots said.

He believes investors who acquired some of Saunum Group's stocks are very pleased now. "The last time I looked, Saunum's stock grew three times from what it was entering the market," Ots said.

Andrus Vare, founder of sauna company Saunum, said other entrepreneurs have had great interest for his experience on the market. Going public gave the company a lot, mainly for the company's credibility and reputation.

"We received over 1,600 new owners that are also working as salesmen for us in a way, so going public gave us a lot of fame. In addition, it has brought a certificate of quality. We have felt that especially when going to foreign markets - if we say we are listed on Nasdaq, we are taken serious. There are no more questions about what kind of company we are and what is Esotnia. And of course, going public brought money, which we needed for development," Vare noted.

He encourages entrepreneurs to consider going public but it comes with great effort. "You must prepare a project and it is not simple at all, it has its standards," the entrepreneur said.

Vare also noted that the accounting side must be handled correctly. "One of the main ideas of the stock exchange is that companies need to be transparent and understandable," he said.

Going public does not come cheap either: "It is not cheap! We calculated that you should consider at least €40,000 and if you involve a lot from the outside, even more," Vare said.

He admitted that the Nasdaq seemed too big to grasp starting up. "It came as a surprise that going public was easier than we imagined," Vare said.

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Editor: Kristjan Kallaste

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