ESTONIAN FINANCIAL AND TAX INFRASTRUCTURE

Estonia's advanced banking infrastructure is represented by several Scandinavian banks such as Swedbank, SEB,
and Luminor.

Swedbank

SEB

Luminor

TAXATION OF COMPANIES

According to the Bank of Estonia, as of the end of 2016 the volume of foreign investment was...

0%

Income Tax

20% - Russia
17% - Singapore
15% - Germany

INVESTMENTS

There is no definition of income tax in Estonian legislation, but there is a concept such as taxation of profit distribution, which is applied only to dividends and other income distributions.

200 million €

Investment

18 billion € - Russia


 

ESTONIAN ECONOMIC ENVIRONMENT

Competitiveness is assessed, inter alia, on the basis of the simplicity of the tax system and the level of bureaucracy and corruption. This is evaluated by the World Economic Forum.

ESTONIA HOLDS THE 1ST PLACE IN THE WORLD:

International Tax Competitiveness Index (OECD)

Estonia has the highest percentage (99.8%) of literacy in the world

Regarding corruption and the simplicity of the tax system (based on the results of the PwC survey)


 

LATVIA'S COMPETITIVENESS

2018 INDEX
OF ECONOMIC FREEDOM

The Index of Freedom

28th PLACE

LATVIA

2nd place - Singapore
25th place -  Germany
107th place - Russia

WORLD BANK ANNUAL
REPORT 2018

Doing Business Report

19th PLACE

LATVIA

2nd place - Singapore
20th place-  Germany
35th place - Russia

GLOBAL COMPETITIVENESS
REPORT 2018

World Economic Forum

54th PLACE

LATVIA

23th place - Singapore
5th place -  Germany
43th place - Russia


 

LITHUANIA'S COMPETITIVENESS

2018 INDEX
OF ECONOMIC FREEDOM

The Index of Freedom

19th PLACE

LITHUANIA

2nd place - Singapore
25th place -  Germany
107th place - Russia

WORLD BANK ANNUAL
REPORT 2018

Doing Business Report

16th PLACE

LITHUANIA

2nd place - Singapore
20th place -  Germany
35th place - Russia

GLOBAL COMPETITIVENESS
REPORT 2018

World Economic Forum

41th PLACE

LITHUANIA

23th place - Singapore
5th place -  Germany
43th place - Russia


 

VOLUME OF BALTIC DEPOSITS AND FOREIGN INVESTMENTS IN THE LARGEST VENTURE CAPITAL FUNDS IN ESTONIA:

59,2 billion €

Total deposits in Baltic banks: € 59.2 billion – 12.8 million existing contracts.

16 billion €

Total assets of investment and pension funds in the Baltics: € 16 billion – 3.9 million existing contracts.

3,4 billion €

Total Baltic investment portfolios: € 3.4 billion as of 2016

1,8 billion €

The volume of foreign investments in the Baltics is € 1.8 billion.

2,2 billion €

Volume of foreign investment
€ 2.2 billion out of the Baltics.

60 billion €/ month

The volume of new money to be printed by the
European Central Bank is 60 billion € / month.

VOLUME OF THE LARGEST VENTURE CAPITAL FUNDS IN ESTONIA:

  1. Baltcap, € 240 million including Baltic Infrastructure Fund € 100 million, Baltcap Growth Fund € 50 million.
  2. Ambient Sound Investments € 100 million.
  3. Livonia Partners Fund I, € 70 million.

VOLUME OF THE LARGEST VENTURE CAPITAL FUNDS IN LATVIA:

  1. BaltCap Latvia Venture Capital Fund
    € 90 million
  2. Livonia Partners EIF Co- Investment Fund
    € 83 million
  3. EKO Investors Fund € 48 million

VOLUME OF THE LARGEST VENTURE CAPITAL FUNDS IN LITHUANIA:

  1. Baltcap – Lithuanian SME Fund € 76 million
  2. UAB Litcapital – Fund Litcapital I € 54 million
  3. MESINVEST- Business Angels Fund I € 38 million

 

BALTIC AND ESTONIA'S COMPETITIVENESS

The Economic Freedom Index was created in 1995 by the Heritage Foundation to measure the degree of economic freedom of the nations of the world. In World Bank Annual Report 2018, countries are ranked according to the simplicity of the regulatory environment for new companies (Doing Business Report). The World Economic Forum calculates competitiveness based on 12 pillars such as labor market efficiency, macroeconomic stability, skills, innovation capability, etc.

2018 INDEX
OF ECONOMIC FREEDOM

The Index of Freedom

7th PLACE

ESTONIA

2nd PLACE – Singapore
25th PLACE – Germany
107th PLACE – Russia

WORLD BANK ANNUAL
REPORT 2018

Doing Business Report

12th PLACE

ESTONIA

2nd PLACE – Singapore
20th PLACE – Germany
35th PLACE – Russia

GLOBAL COMPETITIVENESS
REPORT 2018

World Economic Forum

29th PLACE

ESTONIA

23rd PLACE – Singapore
5th PLACE – Germany
43rd PLACE – Russia


 

DISTRIBUTION OF SECURITIES MARKETS

The Nasdaq Baltic Stock Exchange is the only regulated securities market or trading environment in the Baltics. The Baltic Stock Exchange is part of the international Nasdaq Group, which, among other things, organizes stock exchanges in Estonia, Latvia, Lithuania, Finland, Sweden, Denmark, Iceland and the USA. All these countries utilise a common trading system with harmonised rules. This will, for example, make it easier for brokers and investors in Nordic markets to invest in the Baltic market, while providing listed Baltic companies with the potential for a significantly larger domestic market.

GLOBALLY, SECURITIES MARKETS ARE GENERALLY DIVIDED INTO THREE BROAD CATEGORIES:

The first category is the securities market. The first and best known of these is the stock exchange, on which listed securities are traded. The stock exchange is the safest option for investors, as it places the most stringent requirements on companies for both going public (i.e. listing) as well as with regard to their future behaviour. In Estonia, this is known as the main list.

The second category is the regulated market, known in Estonia is as the secondary list. This market segment is primarily intended for quickly growing and riskier companies, and here the rules for admission are somewhat less stringent. For example, companies in the secondary list must have a 2-year history of operation and also have lower capital requirements – the market value must be at least € 1 million. With regard to information disclosure and communication with investors, however, secondary list companies are subject to the same requirements as main list companies.

The third category of the securities market is the alternative market (the so-called unregulated market), where both admission and information disclosure requirements are lower still. As investors’ interests are the least protected on this market, it is also the riskiest option. The alternative market is primarily intended for companies that wish to raise capital from investors, but do not meet the relatively stringent requirements for listing in the main or secondary list or simply find the fulfilment of the requirements excessively burdensome.


 

FIRST NORTH – ALTERNATIVE MARKET

First North is suitable for growth companies that wish to develop rapidly and for companies that need additional capital to enter new markets, gain ground on their competition, or take over companies, and companies that want to be listed in the main or secondary list as their next step.

Nasdaq Baltic First North is the trading facility for many ambitious Baltic companies. For instance, gazelle companies are a good fit. A gazelle is a company that increases its turnover and profits by at least 50% over three years. According to these indicators, Äripäev compiled a list of highest-ranking gazelles in Estonia, with 901 companies in 2018.

INVESTORITELIIT ANALYSES THE GAZELLE COMPANIES AND FACILITATES CONTACTS BETWEEN COMPANIES AND INVESTORS WITH COMPATIBLE PROFILES

NUMBER OF LISTED COMPANIES ON NASDAQ NORDIC FIRST NORTH AS OF 2018: 342 COMPANIES


 

NORDIC STOCK MARKET – NASDAQ NORDIC

Nasdaq USA-l 8,1 trln €.

Nasdaq Nordic 1,36 trln €.

Nasdaq Nordic was founded in 2003 and is the region's leading stock trading platform. Nasdaq Nordic helps customers plan, execute and further optimise their business vision. The Nasdaq Nordic stock market has three divisions:

Nasdaq Nordic (Copenhagen, Stockholm, Helsinki, Iceland) Nasdaq Baltic (Tallinn, Riga, Vilnius) First North (alternative trading system). The market capitalization is € 1.36 trillion for Nasdaq Nordic and € 8.1 for Nasdaq USA.


 

GLOBAL CAPITALISATION OF INVESTMENT MARKETS

The largest investment market is trading in securities, followed by gold and currency trading. Transactions with cryptocurrencies have also become important.

SECURITIES &
SHARES MARKET € 58 trillion

GOLD € 7.5 trillion

FOREX (CURRENCIES)
4,2 TRLN €

RYPTOCURRENCIES
254 BILLION €


 

EXAMPLES OF GROWTH COMPANY PRICING

The pricing of growth companies differs from that of companies in more mature stages of development, the latter are usually assessed using the discounted cash flow method. The assessment of growth enterprises takes into account turnover, the number of employees and the amount of capital invested and the company's development plans.

TAXIFY

Taxi app. Created in 2013 Turnover for 2017 € 30 million. Investments € 149 million. The company is worth € 850 million.

DAQRI

Virtual Reality-based Optics for Industry. Created in 2010 in California, USA. Investments € 234 million. The company is worth € 854 million.

YELLOW MOBILE

A merchandise sales platform on the mobile. Created in 2014 in South Korea. Investments € 85 million, the company is worth € 852 million.

VIDEO GAMING TECHNOLOGIES

Video games for casinos. Created in 2001 in the USA. Investments € 117 million. The company is worth € 1.1 billion.

DATALOGIX

Online social media advertising analysis software. Created in 2001 in the USA. Investments € 73 million. The company is worth € 1,014 billion.

COVERMYMEDS

Drug prescription software. Created in 2008 in the USA. Investments € 4 million. The company is worth € 1,033 billion.

GINKO BIOWORKS

A beneficial bacteria developer and enzyme producer. Created in 2011 in the USA. Investments € 364 million, the company is worth € 1,085 billion.

IMPACT BIOMEDICINES

Manufacturer of drugs to treat bone marrow diseases Created in 2008 in the USA. Investments € 95 million, the company is worth € 932 million.


 

INVESTMENT IN LOAN CAPITAL VS NON-LISTED SHARES

There are to options to invest in a company, either by the way of loan capital or by acquiring non-listed shares.

In case of investing by the way of a loan, the investor enters into a loan agreement directly with the company, agreeing upon the loan amount, loan period, loan interest rate and payment procedure and the rights and obligations of the parties. The agreement also stipulates sanctions for breach of contract and applicable guarantees. The agreement sets the terms for potential early termination and extension of the loan agreement. In addition, the parties will agree upon special terms and conditions for converting the loan into share capital. Investoriteliit coordinates the conditions between the parties and assists in the technical preparation of the loan agreement.

An investment in non-listed shares of an enterprise means the acquisition of a shareholding in an enterprise prior to its listing in the exchange alternative trading system First North. The price of the shares is determined by a valuation that takes into account the assets of the company, the future strategy and the present value of the discounted cash flows. The Investors Association, in cooperation with SwistBankers, helps to conduct a due diligence and strategy analysis and models the company's cash flows in, taking into account different development scenarios, in order to find the value of the shares of the company being invested into. When a company is listed on an alternative trading system, the main or secondary list, the acquired stock position can be realised.

INVESTORITELIIT HELPS FIND THE BEST RISK AND RETURN COMPROMISE FOR THE INVESTOR'S RISK TOLERANCE AND THE BEST-SUITED INVESTMENT METHOD

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