Growth companies that publish their financial statements as late as possible challenge Finland’s transparency. For international investors, the publication of economic figures is shocking, writes HS Vision editor Elina Lappalainen.
March by the end, the earnings season of listed companies will have been patted. The picture of Finland’s corporate economy was completed, and analysts have also updated their perceptions of companies’ future prospects.
One could imagine that during the spring the same would be possible for growth companies. It would be nice to be able to tell about technology companies that have raised large funding rounds, whether the big promises have been met, who grows and who doesn’t. What kind of revenue growth was there at Varjo, which develops virtual reality glasses, or at satellite company Iceye?
However, it will not succeed, because more and more growth companies are pledging their financial figures for as long as is legally possible.
A kind of record was set game technology company Unity before its parent company went public in the US. Its Finnish company handed over its 2018 financial statements only in February 2020.
Last year’s prankster award went to Iceye, which sent its 2021 financial statements to the Patent and Registration Board (PRH) only in November 2022.
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Financial information of privately owned companies in the United States is not public.
Financial statement reporting is required by law and should be sent six months after the end of the financial year. The whistleblowers usually receive a reminder letter from PRH in July. August is the last moment to survive without a reminder fee.
Only a delay of more than a year has serious consequences. In that case, the company may be ordered into liquidation or it may be removed from the trade register.
Therefore, handing over the financial statements in August has become a habit for many growing companies.
In that case, the information provided is already as old as possible, and current information is no longer available.
Over the years, in addition to Varjo and Iceye, this group has included Swappie, which maintains smartphones, smart ring company Oura, and music application company Yousician. However, their financial statements have already been signed and checked in May–June.
Perception is true, and companies are deliberately delaying, says a partner of the private equity firm Lifeline Ventures Timo Ahopelto.
When international venture capitalists and managers jump in, the American vision comes along. Financial information of privately owned companies in the United States is not public. No similar information can be found on Silicon Valley’s growth companies.
“Foreign management teams and investors are shocked when they realize how open data is in Finland. That you can freely look at all the competitor’s numbers online,” says Ahopelto.
From the financial statements, a competitor can see, for example, how much cash, debt or investors’ capital the company has, i.e. what kind of muscles it has to expand in new markets. Based on that, you can assess the profitability and possibly even calculate the product’s margin structure.
When the penalty is minor, according to Ahopello, the choice for the company is clear: the information should be given as late as possible. According to the entrepreneurs, our practice puts Finnish companies in a weaker position than others.
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It is a kind of corporate citizenship.
As a journalist I’m used to thinking that openness and transparency are Finland’s strength as a democracy. Finnish publicity practice also helps the media fulfill its watchdog role. For example, authors of financial journalism are able to analyze companies more precisely based on the right data.
At the same time, however, business subsidies distributed from tax funds are suitable for growth companies. You can think that they are remunerative and that receiving money requires compliance with common rules and public supervision. It is a kind of corporate citizenship.
Without the publication of financial statements, it would be difficult to get behind the hype and be able to really analyze companies’ success or problems.
Thanks to the publicity of financial statements, the media has managed to expose numerous abuses and problems over the years. Thanks to that, we can see how much Paavo Lipponen the consulting company Cosmopolis made money by lobbying for the Nord Stream gas pipeline. Or that the mobility service company Maas Global, known for the Whim application, burned investors’ money and has been in trouble.
On the other hand, many companies also benefit from being able to assess the solvency and solvency of potential partners and customers. Transparency is thought to reduce risks.
Not all capital investors or entrepreneurs think the same as Ahopelto. It is still essential to understand that there is a group of companies in Finland that protest against Finnish legislation and criticize it.
I understand that the idea of transparency can be hard to sell to an American investor.
Transparency comes at a price, but it is a defensible value.
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