Kristiāna Janvare, Head of Investment Banking at Signet Bank

Over the past few years, the attitude of Baltic residents towards personal financial management has been gradually evolving. While building emergency savings was until recently the primary financial goal for most people, an increasing number are now taking the next step by exploring investment opportunities and the capital markets. However, the transition from saving to investing has not been uniform – more than half of Baltic residents have still not invested in any financial instrument. Although the overall trend suggests that the culture of investing is gradually strengthening across the region, investment activity differs significantly between the three Baltic states.

According to the Brand Capital 2025 Brand and Consumer Lifestyle Survey[1], the first step in personal financial planning for Baltic residents remains the creation of an emergency savings fund, cited by 51.1% of respondents. Investment activity across various capital market instruments, however, remains uneven. In 2025, an average of 16.7% of Baltic residents invested in equities, while bond investment activity showed a slight increase – from an average of 6.5% in 2024 to 6.7% in 2025. Nevertheless, more than half (57.4%) of Baltic residents had not invested in any financial instrument in 2025, compared with 54% in 2024. As a result, the proportion of investors in the Baltics declined from approximately 46% to 42.6% over the course of the year.

"The decline in investment activity, particularly in the capital markets, may partly be explained by the lack of new, high-profile IPOs in the Baltics that capture broad public interest. In 2024, the public offering of Eleving Group provided a significant boost to market participation, while no comparable event took place in 2025. At the same time, the Baltic bond market continued to develop, although many people still perceive bonds as a rather conservative or even 'boring' investment because they are not associated with the prospect of rapid returns. However, long-term wealth creation depends precisely on making regular investments in stable financial instruments and maintaining a well-diversified portfolio," says Kristiāna Janvare Head of Investment Banking at at Signet Bank.

The most significant year-on-year decline in the share of investors was recorded in Estonia, where it fell from 48.9% in 2024 to 41.3% in 2025. In Latvia, the proportion decreased from 46.9% to 42.6%, while Lithuania was the only Baltic country to record an increase in investment activity, rising from 42.3% in 2024 to 43.8% in 2025.

Looking at investment trends over a three-year period, the proportion of non-investors in Latvia declined from 60.4% in 2023 to 57.4% in 2025. In contrast, the share increased from 54.6% to 58.7% in Estonia and from 55.0% to 56.2% in Lithuania over the same period. These figures demonstrate that the development of investment habits across the Baltics remains uneven and is influenced by factors such as market opportunities, public sentiment, and investors' willingness to take financial risks.

We Know More, But We Still Invest Cautiously

Financial literacy across the Baltics remains relatively high, although residents' self-assessment of their financial knowledge was slightly lower in 2025 than in 2024. The average financial literacy self-rating across the region stands at 57.7%, down 4.9 percentage points year-on-year. Estonians rate their financial knowledge the highest at 60.4%, followed by Latvians at 58.0% and Lithuanians at 54.8%.

Despite this relatively strong level of financial confidence, nearly half of respondents still lack an adequate financial safety cushion. Half admit that they typically spend their monthly salary within the same month, while more than one-third worry about their ability to pay bills on time. This suggests that ensuring short-term financial stability remains the primary priority for many households.

"The survey findings confirm that interest in investing is gradually increasing across the Baltics, yet a substantial gap remains between financial knowledge and practical action. Many people understandably focus first on building financial security, and this is an important first step. At the same time, it is essential to reinforce the understanding that saving and investing are not alternatives but complementary stages of personal financial management. An emergency fund provides stability, while purposeful long-term investing enables individuals to build wealth and strengthen their financial resilience," says Kristiāna Janvare.

The Most Popular Investments: Third-Pillar Pension Funds and Equities

Across all three Baltic countries, the most popular investment remains participation in third-pillar pension funds. These are used by 28.1% of Latvians, 26.8% of Estonians, and 19.4% of Lithuanians. This indicates that most residents enter the world of investing through long-term savings products with relatively conservative risk profiles.

Equities are the second most common investment choice. Among Estonians, 23.2% invest in stocks, while the figures are almost identical in Latvia and Lithuania, at 13.4% and 13.5%, respectively. Estonia continues to lead the region in retail investor participation, supported by its longer capital market tradition and a stronger culture of investing that has developed over several decades.

Although the Baltic corporate bond market has expanded rapidly in recent years – broadening both financing opportunities for local businesses and the range of investment products available to retail investors – bonds are still chosen by a relatively small share of the population. They are held by 9.4% of Lithuanians, 5.9% of Estonians, and 4.7% of Latvians.

"Investment habits develop gradually, and significant differences remain across the Baltic countries. In Estonia, equity investing is particularly popular, largely due to the historical performance of major listed companies. Success stories such as the more than tenfold increase in Hansabank's share price in the late 1990s helped build confidence in long-term equity investing. It is also interesting to see how Lithuanians, who are active investors across virtually all financial instruments, have increasingly embraced debt instruments in recent years – not only bonds but also debt investment platforms. A market that was once largely reserved for professional and affluent investors has become more democratic and accessible to retail investors throughout the Baltics. Latvians, meanwhile, continue to favour diversified, professionally managed investments such as third-pillar pension funds and unit-linked life insurance. These products often serve as the first step before individuals begin investing directly in equities or bonds. Initial investments in stocks are also frequently made in well-known domestic companies," explains Kristiāna Janvare.

Looking ahead, investment behaviour across the Baltics will be shaped by several key factors: the ability to translate financial literacy into practical action, the continued development of digital investment solutions, a growing number of local companies entering the capital markets, and increasing public trust in the financial sector. As more people see positive investment success stories and recognise that investing can begin with relatively small amounts, the number of retail investors is expected to grow steadily, further strengthening the investment culture across the Baltic region.

[1]Brand Capital, the 2025 Baltic Brand and Lifestyle Study. The public opinion survey was conducted in June and July 2025 by Norstat in collaboration with Magic Agency, polling 3,010 Baltic residents aged 15–74.

On November 27, Riga hosted the Baltic Capital Markets Conference 2025, the largest capital markets conference in the Baltics, which brought together more than 500 participants and 35 speakers – international and local investors, entrepreneurs, regulators, and policymakers, including the Prime Minister of the Republic of Latvia and the finance ministers of all three Baltic countries. A common conclusion emerged from all five discussions: the potential of the Baltic capital market is still significantly underused, and its development is a key factor in the region's long-term economic stability, growth, and security.

Long-term competitiveness depends on the ability to attract and channel capital

Opening the conference, Latvian Prime Minister Evika Siliņa emphasized that the long-term competitiveness of the Baltic states will depend on their ability to channel more savings into investments: "A developed and unified capital market means more financing for companies, more investment in the region, and greater prosperity in the long term. In Europe and the Baltics, too many resources are held in bank accounts and are not generating returns. This holds back innovation, competitiveness, and our ability to develop a modern economy. The potential in the Baltics is really great. By listing state-owned companies on the stock exchange, we can give a strong boost to the market, involving our own citizens and strengthening their opportunities to earn a return on their investments. Smart investments in company shares, bonds, innovation, and new technologies, including artificial intelligence, will promote economic development. Latvia and Europe can increase their competitiveness in the world!”

Financial literacy and the use of capital market instruments – a practical opportunity for the region to grow

In their opening speeches at the conference, both Mārtiņš Kazāks, Governor of Latvijas Banka, and Roberts Idelsons, Chairman of the Board of Signet Bank, emphasized that a developed capital market is not a luxury, but a necessity – a requirement for the region's economic growth, stability, and ability to self-finance future development.

Mārtiņš Kazāks pointed out that in the Baltic States and Europe as a whole, the capital market plays a key role in promoting structural change in the economy and the region's global competitiveness. At the European level, it is necessary to finally create a fully functioning unified financial market, reducing its fragmentation. Financial literacy is crucial for quality decisions and productive investments, both at the individual and corporate levels. "A strong capital market in the Baltics will not be created overnight. However, with determination, regional cooperation, and a modern policy framework and mindset, we can create a capital market that is dynamic, innovative, open, and responsible."

Roberts Idelsons also emphasized the importance of financial literacy, especially among entrepreneurs, pointing out that this is one of the greatest sources of growth potential in the Baltic region. He highlighted that wider use of capital market instruments could significantly strengthen companies' financing opportunities and the economic structure. Idelsons also pointed out that the growth of the Baltic bond market is essentially just beginning – investor interest and issuer activity show that the potential for bond issuance activity in the coming years is very high.

Baltic finance ministers: structural changes and greater capital market integration are needed

Arvils Ašeradens, Minister of Finance of the Republic of Latvia, Kristupas Vaitiekūnas, Minister of Finance of the Republic of Lithuania, Jürgen Ligi, Minister of Finance of the Republic of Estonia, and Burkhard Kübel-Sorger, Vice President and Chief Financial Officer of the European Bank for Reconstruction and Development (EBRD), agreed during a panel discussion on the importance of the Baltic capital market for the development of the region that structural solutions are needed for the development of the Baltic capital market. Several common priorities were raised during the discussion: significantly increase the liquidity of the capital market, promote the listing of state-owned companies on the stock exchange, reduce excessive regulation, encourage citizens to invest through tax breaks, and allow pension plans to invest more freely, thereby ensuring a greater flow of local capital into economic development. It was emphasized that successful public offerings are only possible if companies have a clear and convincing growth story.

The ministers also pointed out that one of the most significant challenges is attracting liquidity to the local stock market, while greater regional integration and closer Baltic cooperation would make the market more competitive and accessible to international investors. The ministers agreed that only through coordinated public policy, more active investor involvement, and cooperation among market participants can the Baltic capital market reach its potential.

IPOs and listing of state-owned companies – the most significant potential breakthrough

Capital market statistics show that the Baltic corporate bond market is growing dynamically, with total funds raised exceeding EUR 6 billion, issued by more than 110 companies in the Baltics. These impressive growth figures are largely the result of cooperation between policymakers, regulators, and the private sector, facilitated by events such as the Baltic Capital Markets Conference.

At the same time, discussions focused heavily on the development of the stock market. Experts pointed out that IPO activity is recovering in Central and Eastern Europe, driven by positive economic results and investor interest in Europe and emerging markets. Although the Baltic states are lagging behind in this trend for the time being, there are several companies in the region with strong listing potential.

The Baltic market has historically attracted foreign investors, but in order for capital to return fully, market liquidity and depth must be significantly increased. Strengthening the local investor base also plays a crucial role: a motivating tax system for long-term savings, greater involvement of pension funds in local company shares, and the development of capital market education among retail individuals.

Experts emphasized that listing state-owned companies on the stock exchange is one of the most powerful tools for stimulating the market, as it increases liquidity, sends a signal of market confidence, attracts foreign investors, promotes public involvement in the capital market, and increases the efficiency of state-owned companies.

A successful IPO requires sufficient volume and a clear growth story, while cross-border listings and pre-listing funds help companies reach a wider range of investors and increase the international attractiveness of the market.

Strong capital markets are no longer a matter of choice. A focus on flexibility, public-private coordination, and greater financial literacy is exactly what the Baltic region needs. With targeted cooperation and a clear policy framework, the Baltic states can create a truly competitive, liquid, and future-proof capital market that will accelerate the region's growth.

The conference was organized by COBALT, Eversheds Sutherland Bitāns, GSK Stockmann, Signet Banka, and Sorainen.
Partners – BDO, LHV, Newsec, TEGOS.
Supporters – Baltic Institute of Corporate Governance, British Chamber of Commerce, Latvian Financial Industry Association, Latvian Private Equity and Venture Capital Association, Mission Latvia, Nasdaq.
Media partners – Delfi, Dienas Bizness, Investors' Club, IR, Mediāna, Radio SWH.

Eversheds Sutherland Bitāns

Māris Vainovskis, Senior Partner, Attorney at Law

Marta Rudzīte, Co-Head of Capital Markets Practice

There is currently a considerable financial potential at the disposal of Latvia's residents – approximately twelve billion euros are held in deposits and do not actually contribute to the welfare of society. Meanwhile, capital market and investment fund activity has been gradually increasing in recent years, and more and more private investors are looking for investment opportunities. This is also confirmed by this year's investor survey, which shows that 72% of investors support the strategic listing of state-owned companies on the stock exchange and are also willing to invest if they are managed transparently, with a clear strategy and a sustainable business model.

In order to activate this capital and strengthen the state's financial autonomy, a specific question needs to be asked: how can private capital be used to work towards the state's long-term goals, including ensuring defence, innovation and economic transformation?

A developed capital market is the foundation of a strong economy.

In Latvia, the proportion of state-owned and municipal companies is higher than in other Baltic countries. This difference is historical and continues to influence the structure of our economy. Many important companies are owned by the state or local governments, and a large proportion of them operate in commercial sectors that are dominated by private capital elsewhere.The list of the 101 most valuable companies confirms that the state controls a significant portion of essential assets in the Latvian economy, but this potential is not currently being fully utilised for the development of the capital market.

Firstly, the sale of minority stakes in state-owned companies on the stock exchange could provide significant support for the country's development, financing the development of companies and allowing the state to invest funds in strategically important sectors – defence, healthcare and others. Discussions about the sale of minority stakes in state-owned companies on the stock exchange are often accompanied by comparisons with the privatisation experience of the 1990s. However, today's stock market listing is not identical to privatisation in its historical sense. The state can retain a majority stake and control in strategic companies, offering only a small portion of shares to the public. This approach has been widely used in other European countries and has already proven itself elsewhere in the Baltics in public offerings of shares in companies such as Tallina Sadam, Tallina Vesi, Ignitis Group, where the listing of shares in companies still controlled by the public sector has given a significant boost to market development.

The second important direction is to increase the competitiveness of companies that are important to the state.

Current regulations governing state-owned companies stipulate that state involvement in business is permissible mainly in cases where socially important services are provided, strategic assets are managed, or market failures are prevented. In reality, many of these companies are fully commercial and have the potential to contribute even more to the economy by exporting, promoting innovation and ensuring healthy competition.Partial listing on the stock exchange actually allows the state to gradually reduce its direct presence in the commercial sector, while retaining ownership rights and a decisive vote on all strategic issues. Experience in other European countries shows that, in order to ensure a balance between investor interest and state influence, it is sufficient to offer approximately one-third of the company's capital for public listing. This ensures market liquidity, broadens the investor base and allows the company to attract financing for development, while the state retains control over key decisions.

This model also provides broader public benefits. Publicly listed companies tend to operate more transparently, are more closely monitored and make decisions based on sustainability and results. This means that the company, the state and society as a whole can benefit from a more stable, professional and predictable management environment. In some cases, greater involvement of private capital could also be considered in the long term, if it is economically justified and in the public interest.

The third way to activate private capital for strategic national objectives is to make targeted use of joint ventures or public-private partnerships, combining them with the attraction of financing from the capital market.

With the growing importance of security in Europe, this model is becoming particularly relevant in the areas of defence, cyber security, civil protection and strategic infrastructure. Funding for such projects can no longer rely solely on the national budget. They require significant investment, long-term planning and a stable financing mechanism. Here, too, capital markets are becoming an essential tool.

An example demonstrating the potential of this model in practice can already be seen in the Baltic States. In Lithuania, the state-owned company Valstybės Investicinis Kapitalas issued publicly traded bonds with the aim of financing military and security infrastructure, including the establishment of a Rheinmetall factory. In the first round of issuance, Lithuania raised €25 million, and the total programme volume is expected to reach €400 million.

The implementation of strategic projects through cooperation between the public and private sectors, in conjunction with the capital market, may also be a suitable solution for Latvia to finance projects related to defence, critical infrastructure, energy and security. This would allow state projects to operate within market principles, maintaining state control and investor confidence, without having to wait for budget increases or foreign funding.

Latvia has a unique opportunity to motivate private capital for productive investments that simultaneously strengthen the economy, security and welfare of the society. By making smart and effective use of the capital market, partial listing of state-owned companies, joint ventures and public-private partnership models, it is possible to create a sustainable financing mechanism for strategic projects and ensure that the state retains control over essential assets. This is the path to a stronger, more competitive and financially autonomous Latvia, where private capital becomes a partner in achieving the state's long-term goals.

Over the past two years, the interest of private investors in the capital market has increased significantly in Latvia as well – particularly in government and corporate bonds. The era of low deposit interest rates has come to an end – bank deposits are no longer as competitive, and an increasing number of residents are considering investments in bonds. For this purpose, many open a securities account for the first time to participate in specific bond issuances. This trend is further facilitated by finfluencers – financial content creators on social media platforms such as podcasts, Instagram, and YouTube channels - where they explain bond yield calculations, coupon mechanisms, issuance documentation, or the principles of how the capital market operates.

A legally sensitive boundary begins where an educational explanation of the bond market turns into an invitation to purchase a specific bond as the “most suitable” for a particular situation. Investment services regulation (the MiFID II Directive and the Financial Instruments Markets Law) defines investment advice as a personalized recommendation regarding a specific course of action in relation to a particular financial instrument – this constitutes a regulated investment service. A bond is a financial instrument, regardless of whether it is a bank-issued bond, a government bond, or a bond issued by a company in the Baltic region.

Characteristics of Investment Advice

To qualify content as an investment advice, three characteristics are typically required. First, it is addressed to a specific individual rather than to the public – for instance, through private correspondence or within a closed course or training program. Second, the recommendation is presented as suitable for a particular person, based on individual factors such as income, age, risk profile, or family situation. Third, a specific financial instrument and a specific course of action are identified – such as buying, selling, holding, or subscribing to a new issuance. Where an activity largely meets these characteristics, it constitutes a regulated activity that requires an appropriate license.

In practice, this boundary is most often crossed when “rankings” of bonds or other securities, along with personalized recommendations, are published on social media. For example, participant data may be collected during a training course and subsequently used to send a personalized list of recommendations featuring specific issuances, or, in private messages (DMs), a finfluencer – having knowledge of a person’s age, income, and level of savings – identifies the “most suitable” bond. Such situations come very close to what the law considers investment advice, which requires licensing.

Additional Requirements

Capital market regulation cannot be viewed in isolation from the Market Abuse Regulation (MAR). The Baltic stock exchanges are relatively small and illiquid; therefore, even persistent or persuasive calls from a single popular account to purchase a specific issuance on social media can significantly influence market prices. MAR prohibits both the use of inside information and market manipulation, including “pump and dump” schemes, the dissemination of misleading information, and the artificial creation of demand. These rules fully apply to individuals discussing bonds on social media.

Transparency is also essential. If a finfluencer comments on specific securities, they must disclose their interests – whether they hold these instruments themselves, receive remuneration, commissions, or income from affiliate links, or whether the issuance is organized by their cooperation partner. Freedom of the media and the format of an “opinion” do not provide protection where the actual effect is misleading signals to the market or undisclosed interests that affect the audience.

In recent years, Baltic regulators have become increasingly active in engaging in dialogue with opinion leaders and market participants. Bank of Latvia, the Estonian Financial Supervision Authority, and the Bank of Lithuania not only issue warnings about breaches, but also explain how regulatory rules apply in the digital environment. For smaller market players, obtaining a European licence remains quite costly; therefore, the boundary between education and advice must be observed with particular care. Otherwise, the risk is not only regulatory sanctions, but also reputational damage in a sector where trust is the primary currency.

From a consumer protection perspective, content creators are considered performers of commercial practices. This entails an obligation not to mislead, not to promise unrealistic returns or “guaranteed” profits, and to clearly label advertising. Such labelling must be immediately visible and not hidden at the end of a “story” or a post. As interest in bonds grows, it is precisely the clarity of advertising disclosures and risk transparency that determines whether viewers understand that they are being presented with marketing material rather than independent analysis.

What are the key takeaways for financial content creators and capital market participants from all this?

First, public content should remain educational - it may explain mechanisms, terminology, and the structure of prospectuses, but should avoid personalised advice. Second, private communications should not exceed general principles; if a person requests a specific bond “checklist,” it should be stated clearly that personal investment advice cannot be provided without a license. Third, transparency must be ensured by disclosing partnerships, commissions, and securities held in one’s own portfolio. Fourth, before publication, it is advisable to carefully assess any parts of the content that mention specific instruments or include calls to action.

The development of the bond market in Latvia and the Baltic region is good news for the companies, the state, and the investors. However, overall trust is shaped not only by the quality of issuers and the regulatory framework, but also by how these instruments are discussed on social media. By clearly distinguishing financial education from licensable investment advice and consistently adhering to transparency, finfluencers can become allies of the capital market rather than a source of risk.

Eversheds Sutherland Bitāns

Māris Vainovskis, Senior Partner

Marta Rudzīte, Co-Head of Capital Markets practice group

In Latvia, a significant amount of private funds has been accumulated, but they are mostly held in deposits and do not contribute to economic development. This not only results in unrealised welfare potential for the population, but also hinders economic growth, as the capital could be invested in real projects.

When examining the structure of household savings across the Baltic states, significant differences can be observed. Estonian households allocate 72% to investments in shares and investment funds, which is among the highest levels in Europe. Meanwhile, in Latvia and Lithuania, deposits have traditionally made up the larger share. To change this trend, it is necessary to offer private investors accessible and understandable investment products that encourage individuals to direct their savings into meaningful investments.

It is clear that, just as elsewhere in Europe, people's investment habits do not emerge spontaneously, they require structured initiatives. Sweden is a striking example of how favourable tax conditions for investments and easily accessible investment products have created an environment in which households invest a significant majority of their savings in financial instruments (90%). One of the initiatives in Sweden was the “Allemansfonder” funds, which initially offered a regime where profits were not taxed, thereby encouraging private individuals to invest in funds. Even after this regime was abolished, people's habits of investing in funds remained and continued to develop.

Investment funds are one of the cornerstones of today's financial markets - they allow private investors to access various sectors, diversify risks and invest in targeted projects. Thematic fund segments are currently experiencing especially rapid growth worldwide: defence and security technology funds, sustainable energy and climate solution funds, residential development funds, cyber security, artificial intelligence and biotechnology funds, multi-asset funds, as well as various digital asset solutions. However, in Latvia, the range of funds available to private investors is still largely focused on foreign markets - they track global indexes or invest in international companies, meaning that a significant portion of our investors’ capital works for the benefit of other countries’ economies. Accordingly, a key question is how to achieve the opposite direction: how to create instruments that would allow this capital to be redirected back into the development of the local market and to finance Latvian and Baltic projects that truly need it.

REAL ESTATE FUNDS

Two investment funds are currently listed on the Baltic stock exchanges – EfTEN Real Estate Fund III and Baltic Horizon Fund – both of which invest in real estate projects. Exchange-traded funds available to private investors that invest in real estate are instruments that could become a new source of capital for energy efficiency, industrial projects, residential stock modernization, and other strategic development areas. Globally, real estate funds have widely used the REIT (Real Estate Investment Trust) regime, which further develops this fund model by defining the investment structure and profit distribution rules to ensure transparency and clear conditions for investors. Incorporating this type of fund into national fund regulations also helps foreign investors navigate the market by providing an internationally recognized framework for investment opportunities. Elsewhere in Europe, the REIT regime has already proven its ability to mobilise local capital – for example, in France, Finland, Ireland and Germany, REITs are listed on the stock exchange and are typically required to invest at least 80-90% of their assets in real estate and to pay out most of their profits in dividends, thus creating transparent, understandable, liquid and reliable investment instruments that encourage investor involvement and investment in the local market. Countries structure REIT regimes differently, with varying requirements for legal form, listing, asset type and proportion, and profit distribution, therefore, REITs can be either very strictly regulated or flexibly adapted to the specific needs of a country’s market. Tax regimes also vary between countries. In some places, REITs are fully exempt from corporate income tax, in others, the exemption applies only to certain types of real estate–related income, while in several jurisdictions, tax benefits are granted only if the REIT distributes a specified portion of its profits as dividends.

These different approaches confirm that REITs are not just a technical regulatory solution. They are instruments chosen at the national level that help purposefully attract private and institutional capital to development projects - ranging from residential stock renovation and industrial facilities to energy efficiency and public infrastructure. This is precisely why the experience of several countries shows that the introduction of REITs has become a significant stage in the development of the capital market, promoting both public involvement and foreign investor interest.

ACCESS TO INTERNATIONAL CAPITAL

Although REIT-type funds offer a very practical way to activate local capital and finance development projects right here in Latvia, they are only one of the instruments that can help our capital market become more dynamic and attractive to investors. Another important direction is to increase Latvia's visibility and accessibility in international stock indexes.

MSCI (Morgan Stanley Capital International) is one of the world's most influential index providers, whose classifications and indexes determine the direction of global investment flows. MSCI compiles market indexes covering more than 70 countries, and these indexes form the basis for the majority of passively managed investment funds, exchange-traded funds (ETFs) and pension plans. If a country or company is included in the MSCI index, it ends up in the investment portfolios of thousands of funds around the world. Conversely, if a country is not included in the index, it remains outside the attention of global investors, thereby limiting the available capital.

In recent years, MSCI has paid increased attention to the Baltic region. In 2023, the MSCI Baltics index was created. The creation of this Baltic index is an important step towards greater international fund involvement in the region, allowing investors to assess the region as a single economic area with similar regulations, capital market structure and company profiles. However, although the MSCI Baltics Index is a significant milestone, its impact is still limited, mainly because the Baltic market is currently considered small and less developed (Frontier Market) in the MSCI classification and therefore has a lower priority in global passive investment strategies. Therefore, it is important for Latvia and the region as a whole to continue working on improving market quality, increasing liquidity and the number of companies listed on the stock exchange in order to move up in this classification in the future and attract significantly greater international capital flows.

It is critically important for the Latvian economy to develop a strong capital market so that private savings can become a real driver of growth. Harnessing the potential of investment funds can be one of the most effective tools, but they are only part of a broader solution. For sustainable growth of the capital market, it is essential to increase the number of listed companies by using the capital market to support the growth of both private and state-owned enterprises, as this will ensure greater market liquidity, attract investors, and create opportunities to more effectively finance development of Latvia and the Baltic region.

Interview by Jānis Šķupelis, Editor-in-Chief of the Investors' Club

"We have ambitious private companies that are developing and financing themselves through both banks and public markets. It's a pleasure to see that. The question is, what is happening and what will happen with state-owned companies," Raivis Jānis Jaunkalns, partner at “BDO Latvia”, tells the Investors' Club.

Why does the capital market in Latvia seem unable to really get going?

The main thing we see is that our state-owned companies are not really moving forward. There are not many such companies in neighboring countries either, but they are still listed on the stock exchange. There have been suggestions that, say, 25% of “Latvijas valsts meži” (“Latvian State Forests”) or “Latvenergo” should be listed. This would certainly be interesting, as investors would have access not only to private but also to state offerings. This would allow private investors to buy shares in companies whose services they use.

Data shows that there are currently 8 share and 13 bond issuers on the Latvian stock exchange. Adding the Alternative List, the number is slightly higher. However, this percentage of GDP is still much lower than in Lithuania and Estonia in terms of both shares and bonds. If "airBaltic's" initial public offering (IPO) had gone ahead, it would have been more interesting.

Thus, the market here is not interesting to large foreign investors or anyone else. Many industries are actually dominated by companies whose largest shareholder is the state. There is also a decision to buy out a telecommunications company from foreign investors. The question is: what will happen next? Will it be listed on the stock exchange? And what will be done with the money – will some undisclosed defense budget be “covered up”, or will the money be spent in some other way?

What is the reality of attracting capital through share issues in the country? What are the main problems?

There aren't many cases where this happens. In my opinion, bonds are more attractive to investors because they (offering conditional liquidity) still have a maturity date. There is also a certain percentage that can be counted on.

In my opinion, there are no startup companies in Latvia that have implemented or attempted to implement an IPO at an early stage. When talking to our colleagues in the United Kingdom and other large markets, it is normal for a startup company with a good story to attract money through an IPO. It is a riskier approach, but it can work. In Latvia, the assumption is that you have to be "airBaltic" or another industry leader to go public.

The reality here shows that issuing debt is relatively simpler. There is also a good track record that it works in the Baltics. It is a more private matter who the shareholders are and whether they want to list part of their core business. The largest companies are state-owned, and that is already a political decision. It is also relevant whether the major shareholders of private companies see business sense in an IPO solution. In the end, bonds are more popular here than stock listings.

How difficult is it for Latvian companies to conduct an IPO or raise capital through bonds?

We have good consultants. In my opinion, "Signet Bank" has a very good approach, as it is able to find investors for various scenarios and successfully help companies enter the stock market. The question is what the company itself needs and understands better at a particular stage of development. The main thing is the limit in euros – what can be attracted in the local market? For example, "Eveling Group" chooses to issue large bonds outside the Baltics – on the Frankfurt Stock Exchange – because there are larger investors there.

What is the experience with the ability to enter other capital markets outside our stock exchange?

The companies that plan to do so and are doing so can be counted on the fingers of one hand. Large institutional investors buy up most of the issue. Their requirements usually also outline which specific European stock exchange such securities will be listed on. Companies need to look at what these requirements are.

It is clear that if you are a public company, quarterly reports, corporate governance and other issues are an investment on the part of the company itself, which does not stop when capital is raised. This increases administrative costs and is somewhat more complicated. However, when taking the next steps, it certainly helps to have internal processes in order. This also increases the value of the company and makes it easier to attract capital in the future. The first step is definitely the hardest, but it has to be taken.

How does this process affect the company's development strategy?

It is part of the strategy. You cannot decide one day to raise funds and rely on the fact that in two or three months' time this will happen through a public offering. There is usually a fairly long preparation process, for example, assessing whether the financial statements comply with international standards. Now there are also sustainability reports, which must be prepared to at least some extent. But this is part of the company's strategy and development plan, which goes hand in hand with an increase in its value and recognition. A company's listing is a mark of its quality and should also help in its long-term business development.

How different are the requirements for issuing securities elsewhere, for example in Frankfurt?

I am not an expert on the specific details. However, there is a more detailed prospectus there. It is often created in collaboration with consultants, which makes the process more expensive. Overall, though, it's not that different from the Baltics anymore. I'd like to believe that at least in the European Union, the bar isn't that different. The main thing is whether you're interesting to that market and whether that market is interesting to you.

To sum up: what factors determine the choice between the local and international markets?

Mainly, it is the amount of money that needs to be raised. It depends on where the big investors are. As far as I know, only a couple of energy companies have managed to attract hundreds of millions in Latvia and the Baltics. If it's 10 million, then you probably don't need to rush to Frankfurt or London, because the process isn't cheap.

Will our market end up being pushed aside?

The question is how many companies can try the local capital market. Double listing, which is not so popular here yet, may also be relevant. This also comes back to the attracted euros and recognition. It is easier to "grow" in the local market. If additional financing is needed, the company can go to a more global market. In my opinion, both IPOs and bond issues have been successful for us. From what I have heard from clients, no one has ever regretted it.

What needs to happen to improve investor activity?

I agree with those who say that state-owned companies should finally be listed, because then there would be financial sense and motivation to invest and "push" local small investors. That would also start the ball rolling. We need one or two success stories, and then the rest will follow. There are sectors in Latvia that are dominated by state-owned companies. They have stable revenues and cash flow, which allows them to do so. The logical path would be to finally list something big that we could also partially own ourselves.

Is it realistic to ever solve such problems, taking into account politics, economics, and demographics, for example?

This is a somewhat depressing question. We ourselves feel the demographic challenges in the labor market, and they are also relevant to our clients. In the long term, artificial intelligence aspects are definitely inevitable. There is also the attraction of colleagues from other jurisdictions.

On the other hand, there are many positive developments that educate people about the capital market. As thinking and generations change, everyone can think more about the third pension level, which is good in Latvia with its personal income tax relief.

We come back to the fact that this is a major political decision. However, given all the discussions about the budget deficit, this would be an even more logical step. At some point, we will get there – perhaps we should not borrow abroad, but offer well-performing companies on the stock exchange and finance the economy from our own revenues. I hope that this will happen sooner rather than later, before the hole gets even deeper.

Of course, the question arises as to why there is so much political resistance to listing these companies. Seeing seemingly good financial results, one may get the feeling that there is something else on the other side of the coin. But we will never know until such companies go public and publish their quarterly data. It is difficult to find the financial statements of some of these companies. In other words, the financial results of state-owned companies are not always as easy to find as those of private companies.

It should be the other way around.

Yes. Especially if the company is able to pay out significant dividends on a regular basis. We have ambitious private companies that are developing and financing themselves through both banks and public markets. It's great to see that. The biggest question is about state-owned companies. The capital that can be attracted and turned over there is proportionally very, very large. In my opinion, this is no longer so complicated – the path has been paved. The important thing is to get started, set ambitious goals, work in a strong team, and then everything will definitely work out!

Dr Lina Aleknaitė – van der Molen, Sorainen Lithuania counsel

Kätlin Krisak, Sorainen Estonia partner

Inese Heinacka, Sorainen Latvia counsel

1. Strategic Assessment and Timing

Going public should align with the company’s long-term strategy. It is essential to assess market conditions, capital needs, and alternatives.

For example, Ignitis Group (Lithuania) faced market volatility and debates over listing state-owned firms. Timing was crucial - pricing too high risked losing retail investors, while pricing too low risked undervaluation. Similarly, Enefit Green (Estonia) spent four years preparing for its IPO, postponing multiple times due to acquisitions and uncertainty caused by COVID-19. When market conditions improved, the IPO was a success—demonstrating that patience pays off.

On the other hand, AirBaltic (Latvia), has yet to find the right timing for its IPO, which has been in preparation for some time. The reluctance to launch IPOs of State-owned companies is partly due to a public misconception that IPO equates to privatization, a State-led asset disposal which has not always delivered successful outcome in the past. In the meantime, several smaller IPOs (INDEXO, DelfinGroup, Eleving Group—the largest private IPO so far) have been successfully conducted in Latvia.

2. Regulatory Compliance

Organising a public offering involves preparing a solid and comprehensive prospectus that provides detailed information about the financial standing of the company and other key aspects. For offerings up to €8M Baltic harmonization allows a single English-language document across all three countries – which reduces costs and accelerates the listing process. Additionally, Nasdaq Baltic exchanges are supportive of dual listing structures. To illustrate this possibility, the IPO of Ignitis Group (Lithuania) combined shares and global depositary receipts (GDRs), listing on Nasdaq Vilnius and London Stock Exchange. This marked Lithuania’s first use of GDRs in over 20 years, requiring a custom clearing structure. Similarly the IPO of Tallinna Sadam (Estonia) required amendments to Estonia’s State Assets Act to ensure that the State as a shareholder has access to the same information as all other investors.

3. Corporate Governance and Controls

Public companies need independent boards, robust compliance frameworks, and audited financial statements. Auditors provide a “comfort letter” confirming accuracy of the financials. In addition to these requirements, both for Ignitis Group (Lithuania) and Enefit Green (Estonia) invested heavily in ESG compliance, transparency, and clear communication of the company’s green transition strategy to build trust with international investors.

4. Financial & Operational Readiness

It is essential to upgrade financial reporting systems to comply with the IFRS, to prepare pro forma financials for major changes, and set up a due diligence data room. Additionally, addressing tax and ownership issues early on can help avoiding complications later.

A well-organised group structure is equally important. For example, prior to its IPO, Ignitis Group (Lithuania) delisted subsidiaries (ESO and Ignitis Gamyba) to prevent valuation distortions – failure to take this step could have cost hundreds of millions.

Bottom Line

IPO preparation in the Baltics takes 12–18 months and requires seamless coordination across legal, financial, and operational fronts. While harmonized rules and integrated financial infrastructure provided by Nasdaq Baltic facilitate cross-border listings, success depends on early planning, strong governance, and guidance of experienced advisors. Timing and trust—especially ESG credibility—are critical to securing investor confidence and achieving successful listing.

The Lithuanian bond market has clearly been booming of late. Over the past year alone, we have seen dozens of new issues, most of them with the placement results sending the same signal: demand exceeds supply, issues are successfully placed, and investors are active and looking for attractive returns. This does not come as a surprise, however – for some investors, bonds seem to offer a more attractive alternative than today’s rather volatile equity markets or traditional bank deposits. That said, we have witnessed a few problematic cases that have surfaced publicly, reminding everyone that return comes with risk – and at the heart of how that risk is handled stands the bondholders’ trustee.

“We can see that investors are active and looking for more attractive returns. But at the same time, the market has returned to some fundamental questions: how do protection mechanisms work? What happens when the obligations set out in the issue documents are breached? How quickly are decisions taken?” says Eva Suduiko, partner and attorney-at-law at Law Firm COBALT.

Who is the bondholders’ trustee and when is appointing one mandatory?

A bondholders’ trustee is a person who represents all bondholders and protects their interests in relations with the issuer – the entity issuing the securities – as well as with third parties. Put simply, the trustee is the bond investors’ “collective voice” and organised representative, especially when things become complicated.

In many cases, the appointment of a trustee is mandatory, particularly for publicly offered bond issues. Sometimes issuers appoint a trustee voluntarily, even when there is no strict legal obligation to do so – this is often seen as an additional sign of commitment toward investors. However, there are also exceptions where no trustee is required, according to Rimgaudas Pazniokas, partner at UAB Audifina:

“For example, this is the case when the issue is intended only for professional investors, when the total value of the public offer does not exceed EUR 1 million over a 12-month period, or when the nominal value of one security or the minimum investment per investor is at least EUR 100,000.”

The role of trustee in “normal times”: active but invisible

To many investors it might appear that the trustee “steps in” only when something goes wrong. However, the partner at Audifina stresses that the trustee’s role is always active – it is just largely invisible as long as everything is running smoothly.

“Normally, when everything is on track, the trustee maintains regular contact with the issuer, monitors whether the issuer is complying with the terms and conditions of the issue, including financial covenants, and checks whether other obligations to bondholders are being fulfilled,” says R. Pazniokas. “As long as everything is going according to plan, investors simply do not see this work – and that is a good sign. However, it is precisely this ongoing monitoring that usually allows trustees to be the first to identify irregularities and take measures to address them.”

What problems typically arise and what can a trustee do to address them?

In practice, a number of most common problems can be observed.

“There can breaches of financial obligations set out in the bond issue documents– for example, the issuer’s financial performance indicators no longer meet the agreed thresholds. Less frequently, there may be delays in interest payments, and more rarely – difficulties in redeeming the bonds from investors at maturity. When red flags start to show, it is important that the trustee strictly follows the course of action defined by law and the specific issue documents. Trustees have limited leeway in what they do – they must operate within a clearly defined framework,” says attorney-at-law E. Suduiko.

According to her, the trustee first requests information from the issuer, assesses the performance of obligations and, where necessary, triggers decision-making – convenes a meeting of bondholders, provides recommendations regarding amendments to the terms of issue or refinancing. In extreme situations, the trustee may exercise the rights of a pledgee or mortgagee or bring a claim before the court. It is at such bondholder meetings that the trustee becomes most visible, as it is the trustee who takes the initiative to address critical issues: whether to negotiate, whether to change the terms, or whether to initiate legal action.

It is important to note that precisely in such situations, when questions arise whether obligations are being fulfilled, the trustee’s workload and costs increase. Paradoxically, the trustee has the largest workload when the issuer is under the greatest financial stress, given the need for more frequent meetings, additional negotiations, and more intensive management of documentation and information flows. Therefore, R. Pazniokas says that it is crucial to agree clearly on the trustee’s remuneration and cost compensation mechanism at an early stage – already in the issue documentation – this helps avoid disputes at critical moments and speeds up decision-making.

Nevertheless, the trustee’s being active does not guarantee the [desired] outcome – the final result depends not only on the trustee’s actions but, above all, on the approach the issuer adopts. As the trustee’s representative points out, in practice most issuers cooperate to work out a solution, while dialogue is usually avoided only when there are no realistic options in sight for the issuer. For this reason, when assessing a bond issue, investors should look not only at the coupon rate but also consider the issuer’s reputation, transparency and attitude towards investors –factors largely determining whether decisions will be taken in a timely and constructive manner.

Finally, whether decisions are adopted and implemented on time also depends on investors’ own engagement. Although the protection of investors’ interests is a topic much discussed about, investors themselves do not always actively participate in the process.

“Experience shows that it is often difficult to achieve high investor engagement in processes, with engagement levels typically increasing only when problems with bond redemption are already there. Low engagement has a very concrete consequence – decision-making is delayed by the need to convene repeat meetings. In critical situations this translates into lost time and, in some cases, lost opportunities,” says R. Pazniokas.

Access to information: how do investors get updates?

A natural question arises – perhaps investors simply do not receive information in time, and that is why problems arise? According to the attorney-at-law at COBALT, no individual notices are normally sent to investors, which is why anyone investing in bonds should actively follow official information channels to stay updated rather than wait for a personal email or expect any other form of attention.

“In practice, information for investors about the issue and its progress is usually published on the trustee’s and the issuer’s websites. If the securities are traded on the Nasdaq exchange, relevant information is also published there. In addition, further information channels may be specified in the issue documentation,” says E. Suduiko.

Bankruptcies and restructurings: what do extreme scenarios look like?

Since the bondholders’ trustee regime was introduced in Lithuania less than a decade ago, there have not yet been many high-profile cases. Most of the public attention in 2024 went to the bankruptcies of the logistics and transport company Integre Trans and the beauty and cosmetics wholesale company BigBrand, as well as the restructuring of the organic food producer AUGA group.

Practice is still evolving, and the regulation in place is not yet fully comprehensive, but typically in such situations the role of the trustee diminishes:

“In the event of insolvency, the trustee provides information about individual investors to the insolvency administrator, after which point investors participate in the process directly. The trustee usually remains involved as the holder of collateral (where the bonds were secured for the benefit of the bondholders by a pledge or mortgage) and arranges settlements with investors from the proceeds of enforcement,” says R. Pazniokas.

In either case, there is no clear-cut answer as to whether investors will recover all their money in such crisis situations. Even where there is security in place – a pledge, mortgage or similar – the final outcome, i.e. what portion of the invested amount will be recovered, depends on the issuer’s actual financial situation and its ability to continue as a going concern, historical performance (revenues, profitability, cash flows), the ability to raise new financing, as well as the actual value of the pledged assets and the prospects for their realisation.

What should investors consider before investing in bonds?

Recommendations from both the trustee and the lawyer are, as a first step, to assess the issuer itself – its reliability, historical financial performance and whether its business model is clear and consistent (for example, whether the business is profitable and sustainable, whether revenues and profits are stable, and whether the level of debt and the growth plans can be viewed as reasonable).

“It is no less important to realistically assess risk: a higher coupon rate usually involves higher risk,” notes E. Suduiko. “The next element is security: is there collateral, what is its quality and how realistically would it be enforced in an adverse scenario? Finally, the issue documentation: the provisions of the terms and conditions are not a mere formality. They define the key risks, specify what constitutes an event of default and how problematic situations will be handled.”

Quiet equity, stronger bond market

In 2025, the Estonian capital markets have so far continued the trends that first emerged in late 2023 and 2024 – almost complete lack of newcomers to the equity market, a somewhat more active bond market and elevated activity in terms of takeover bids and delistings.

Nominally, the result of 2025 in numbers is marginally better than in 2024 – Nasdaq Tallinn First North market had one IPO (Primostar Group) as opposed to zero IPOs altogether in 2024 and so far 10 public bond offerings have taken place, compared to 7 in 2024.

On the other hand, 2025 has seen the reduction of the Baltic Main List by the transferral of PRFoods to the Secondary List, as well as by a number of takeover bids.

The wave of takeovers and delistings

The takeover bids trend started in 2024 with voluntary bids for Tallink Group and Nordic Fibreboard, related to intragroup restructurings or changes in ownership rather than delisting. In 2025, the takeover and delisting of Enefit Green, a green energy subsidiary of Eesti Energia, was completed. Enefit Green’s 2021 IPO was the largest ever in Estonia, with more than 60,000 retail investors, so the exit of such a big player is a significant backlash. This was somewhat alleviated by the bond issue of its parent Eesti Energia, marking its debut on the local capital markets and providing investors an alternative investment opportunity, hopefully helping to keep these investors active. The trend for taking listed companies private continued in November when the intention to acquire the shares of Ekspress Grupp via a voluntary takeover bid was published, with an aim to delist the shares following the successful takeover.

Geopolitical risks and the consequences of tax uncertainty

The wave of takeovers and delistings reflects the general market sentiment. The global geopolitical and macroeconomic situation has become increasingly uncertain. For the past five years the world has seen significant ruptures – starting from the pandemic and followed by the war in Ukraine and as of lately by the import tariffs imposed by the USA and the unpredictable nature of Trump’s administration in general. In Estonia, the global uncertainty has been exacerbated by sporadic tax changes. Until recently Estonia had a simple and foreseeable tax policy, but in recent years this has shifted from straightforward tax increases to more complex solutions such as a proposed security tax effectively introducing corporate income tax, which was later reverted by the new government. All these developments have led investors to seek more stable instruments, as evidenced by the continuing boom in bond offerings, mostly driven by local credit institutions and, more recently, by real estate companies (such as Liven, which issued the first Green Bond in Estonia, as well as Invego, Everaus and Arco Vara). In light of the reduced interest in equity instruments, issuers increasingly weigh the costs and benefits of being listed, which regretfully has led to a number of exits from the market.

Public company burdens and the auditing bottleneck

From the issuer’s perspective, being a public company entails significant administrative obligations. As a positive recent development, the envisaged marked increase in obligations – complete ESG reporting – has been halted and subjected to comprehensive review under the Omnibus package. However, the auditing obligation has become increasingly difficult for listed companies to fulfil, partly due to the increased workload of auditors and because of recent changes in international auditing standards. Auditing of annual accounts is an important factor in ensuring the reliability and validity of financial data published by issuers and thus plays a vital role in the normal functioning of capital markets. Any changes in regulatory requirements in that area have to be carefully thought through and this dilemma is unlikely to have any easy fixes.

IPO ambitions vs. market reality

There are renewed anticipations for privatisation of certain state-owned companies, which the government seems to consider. Furthermore, a few larger industrial groups and a unicorn have been talking about a potential IPO for years. Realistically, as long as the economic situation wobbles and major geopolitical crises remain unsolved, it is difficult to predict a new IPO-drome emerging in Tallinn any time soon. Potential issuers are hesitant and for the time being focus on streamlining their business processes and rely more on bank lending and private placements of bonds, a market that has gained momentum. The local capital markets are still struggling to attract foreign institutional investors (typically cornerstones of any significant IPOs), and local pension funds continue to allocate a very low share of their portfolios to domestic companies.

Listing act reform and easier access to capital

However, there have been several positive regulatory developments that seek to elevate the markets. The regulatory landscape in Europe and Estonia has been reformed to simplify raising capital from public markets. Amendments to the Prospectus Regulation (the Listing Act) simplify prospectus requirements. The new Prospectus Regulation, in force from 5 March 2026, also introduces a dual prospectus threshold under which member states can choose either 5 or 12 million euros in aggregate value over 12 months; based on the draft bill, Estonia is likely to opt for the higher 12-million-euro threshold, further incentivising the use of capital markets. In 2024, a new regulation of the Minister of Finance on the information document for public offerings entered into force for offerings below the prospectus threshold. Its wording is unified across the Baltics, enabling passporting for small-sized offerings, and it was first successfully tested by Primostar Group in its pan-Baltic IPO in spring this year.

Currently, the Estonian capital markets seem to be in a standstill, with market participants preparing for new growth. The 10% growth of the Nasdaq Baltic Benchmark index in 2025, compared to almost no growth in 2024, and the upcoming regulatory changes in 2026 (entry into force of the Listing Act) allow a cautious optimism. Global macroeconomic trends are increasingly difficult to predict; however, once some stability is achieved more steadfast growth is likely to follow and feed into the livening of the Estonian capital market. Market participants and regulation seem to be well ready for the new ride to start soon!