Zynga isn’t the day’s only IPO: Hagar, a 2000-employee commercial enterprise that owns two of Iceland’s best-known supermarkets and such globally recognizable brands as Zara and Topshop, went public on NASDAQ’s Icelandic exchange this morning. As today’s Financial Times notes, it’s an important milestone in the nation’s rebound from the depths of the 2008 collapse, when the stock exchange lost 95% of its value. We spoke to Pall Hardarson, President of NASDAQ OMX Iceland, about the implications and whether this represents a true turning point.
What’s the significance of the first public offering since the 2008 collapse?
It’s very important. The three big banks in Iceland collapsed in 2008, with tremendous repercussions for the economy as a whole. We really lost all of the financing channels for companies. When we look at the banking sector, it had been very conservative. These channels have been blocked since the collapse. In the long haul, that’s very damaging to any economy. In my mind, the listing of Hagar represents an opening up of an important channel of funding for companies, and it really marks the first step in normalizing that aspect of business in Iceland.
Since maybe the fall of 2010, we’ve sensed great interest for more diversified investments in Iceland. Investors have been eager to act in the resurrection of the economy. But the fact of the matter is that many businesses in Iceland had really damaged balanced sheets, so many have been going through reconstruction since 2008. This process has gone extremely slowly. Hagar is one of the first major companies to come out of financial reconstruction. We have been telling companies for a long time that they should seek financing in the equity market and that the equity market was ready to finance businesses and this would help with the growth of the Icelandic economy. We’ve found that everybody has been waiting for the first listing. It was eight times oversubscribed, which is fantastic. It wasn’t a very big offering, about $43 million in dollar terms, but bids came in for over $340 million. This really is going to push other companies down the same road, so to speak.
So you think this is the beginning of a trend, rather than an early outlier?
Definitely. Since this offering finished on the 8th of December, I have already sensed increased interest among Icelandic companies about listing. One company we had been courting publicly announced only yesterday its intention to list in 2012. I think that’s not unrelated to the success of the Hagar offering. Of course, Hagar is a very well known company. They own two supermarket chains here in Iceland and basically a third of the market. They have a fairly generous dividend policy, which is unusual here.
We’ve had a number of companies that have firmly stated they will be listing in 2012. We already have one company in the listing process and I expect it will list within a few weeks. We’ll be receiving an application from another company within a few weeks and it will probably list in late Q1 or early Q2. We have another three companies that have actively announced they’ll be listing in the latter half of the year. Then we have a number of companies that haven’t spoken publicly about it but we’ve been courting them and they have shown real interest. All together, if I add all the companies we’ve been in contact with that have expressed interest in listing in the next two to three years, I think it’s around 30. Some will drop out, but it is still an indication of interest.
Could you speak a bit about Hagar specifically and its place in the national economy?
It’s not a huge company in terms of the economy, but it is important in people’s lives. A lot of people have some connection to this company because of its popularity. Of course, it’s important for the economy, but I also think it’s important in another respect. We had some disconnect between businesses and people here after the collapse. Business people are seen as corrupt and worthy of nothing good. We need to reconnect here. Otherwise, we create an atmosphere where we make bad decisions. Because ultimately, how businesses are doing will impact the standard of living in the country. It’s an ideal company to start this process. It’s a major brand in Iceland, a major retailer. So for other companies in retail or focused on servicing the domestic economy, this is going to create an incentive. The repercussions are quite important.
How do the trouble in the EU affect your view of the Icelandic recovery?
I think the optimism regarding what is going to happen in the next few months is, I wouldn’t say unrelated to what’s happening in Europe, but I think it’s not going to damage this process to any significant degree. Iceland is a little bit ahead of the curve when it comes to economic growth at the moment. You could say it was the first country to suffer from the financial crisis, but the economy is growing a little bit ahead of most other countries. We took the fall earlier, but we’re also experiencing growth earlier than you’ll see in the other countries.
Of course, if something really drastic happens, I don’t think anybody’s going to be unaffected. But the prospects are really good in spite of the troubles.