Capital Plans Big on the Bourse

Next year looks like it will be a big one for initial public offerings in Germany, with around 15 firms set to list on the stock market.
Oliver Samwer, one of the three brothers behind start-up incubator Rocket Internet.

When the English teacher Jack Ma started the Chinese e-commerce company Alibaba from his Hangzhou apartment, he never dreamed of how successful it would become.

But 15 years later, he presided over the world’s largest ever initial public offering (IPO) worth $25 billion (€20.4 billion) on the New York stock exchange. The shares jumped 36 percent at their debut in September to $92.70 and they have only climbed higher since then.

German equity markets weren’t nearly so euphoric about the IPOs of web-related firms led by the Samwer brothers in 2014. But investors in both their start-up incubator Rocket Internet and online retailer Zalando have still booked gains of 20 and 17 percent respectively since launching this fall.

Rocket Internet accounted for nearly 40 percent of total German emission volume with €1.4 billion, according to the firm Kirchhoff Consult, making it the fourth largest IPO in Europe this year.

But many investment bankers think 2015 could be even better.

“The example of Rocket Internet showed that it is also attractive for an Internet company to list on the stock market in Germany and can compete with a listing in the USA,” said Andreas Bernstorff, who is responsible for German IPOs at the fianancial firm Citigroup.

He believes many German e-commerce firms could also soon go public.

But it’s not just tech enterprises such as Rocket and Zalando that are doing well on the stock market. The share prices of both Stabilus, a machinery producer, and Hella, an auto parts maker, have both gained since their listings this year. Only the stock of roof and building manufactor Braas Monier has tanked, falling 35 percent since its IPO. That’s comparable to the losses that most investors in new Chinese listings suffered this year – Alibaba's success aside.

The only blotch on this year was the fourth quarter, when tech firms pulled planned listings out of fear of an economic downturn.

But 2014 was still one of the best years in a long time for IPOs around the world.

Germany saw 11 firms go public, including SLM Solutions, Stabilus and the property broker TLG as regular IPOs. Real estate concern Buwog and auto parts maker Hella were listed as part of their privatizations.

“Especially financial investors used the stock market to exit their positions more than they have in the past ten years,” said Martin Steinbach, equity expert for the EY consultancy.

The only blotch on this year was the fourth quarter, when tech firms pulled planned listings out of fear of an economic downturn.

Mr. Steinbach said the IPO market would pick up in the first quarter of 2015, likely including the listing of e-commerce marketplace operator Scout 24. Ralf Nachtigall, who is responsible for new emissions in Europe for Barclays, said he expects 15 German IPOs next year.

There are plenty of reasons to be optimistic.

“Conditions for public listings will remain very good in the new year,” said Mr. Steinbach. “Investors are desperately looking for alternative forms of investment because of the extremely low interest rates.”

Moreover, U.S. investors will look to enter Europe as a weakening euro has made investments here more attractive.

That will likely help German pharmaceuticals giant Bayer, which wants to float its plastics unit MaterialScience.

“I prefer a classic stock market listing according to the rules of the art,” said Bayer boss Marijn Dekkers, who wants to focus on pharma and agricultural products.

MaterialScience accounted for €11.2 billion of Bayer’s total €40 billion sales in 2013, which could make it one of the year’s largest IPOs. Analysts from the Frankfurt-based firm Equinet have value MaterialScience including its debt and pension’s obligations at around €10 billion.

Such corporate spin-offs are also more in vogue than they used to be, and a number of such moves are planned for 2015.

Buwog separated from Austrian real estate parent Immofinanz and was listed this year, while Siemens last year floated its lighting unit Osram. Siemen now wants to spin off its hearing aid division and energy giant E.ON is now planning to unload its conventional energy production.

Financial investors will also continue to play an important role. For example, private equity firm PAI Partners is looking to unload the building materials maker Xella.

“The list for going public and stock emissions is long. And it will get longer via takeovers,” said Christian Zorn, the head of investment banking in Germany for Morgan Stanley.


Robert Landgraf is deputy editor of Handelsblatt's finance section and Susanne Schier covers market developments for Handelsblatt in Frankfurt. To contact the authors: [email protected] and [email protected]