Out of Pandora’s Box

Not that long ago, the equity fund Axcel listed Pandora on Copenhagen’s stock exchange. Firstly as a big success – then an anticlimax – and now again soaring in value. 

Pandora was – as you know – the first woman in Greek mythology. She let evil, illness and hope out of the box given to her by Zeus to punish humanity.

Hope was no good in a world where man does not control events. As Hesiod put it: hope is foolishness and self-deceit on the part of man as the future is beyond his control.

Other than that, we have not seen listings with success for quite a while. ISS, OW Bunker and possibly DONG are lurking and will no doubt succeed.

However, in Denmark we are going through a drought when it comes to the listings of the small and medium-sized companies (SMCs).

For some time now, even the equity funds have been finding out that the easy days of extreme leverage financing from generous banks are over.

And so is creating a sound EBITDA and cash flow and moving up the food chain to bigger funds or listings.

Only faint echoes remain of easy returns for investors of more than 25 percent IRR. 

Now equity funds have to manage the companies and not just groom them and make them sexy.

The portfolios are stuffed with investments, having passed the last sales day some five to seven years after acquisition.

We can only assume that the reluctance to list the SMCs lies in the poor acceptance of the reduced revenue when unleveraged investments in companies with a modest performance hit the market. 

Put greediness aside and put it down into Pandora’s box and go public.

With a very low return on bonds, the share prices are roaring because there are not enough shares on the shelves and your typical Danish company is not ISS and the like, but very much smaller and suffering from a shortage of capital.

Many of the Danish banks are still hiding in the woods waiting for their total number to be cut down to an operational size, which they need to help them raise the necessary market funding. So public listings are the answer. 

Springtime is coming, and we hope that the deep frozen capital market is thawing.

The SMCs can help generate a similar growth to the one we have seen in Danish industry before. After all, in the past they took on the burden of making Denmark a welfare society. They can do it again.