Amsterdam, New York, Frankfurt. For many companies, the question of where the first public issue of their own share certificates (IPO) will take place no longer arises. Only around 10 percent of the global IPOs do not take place in the home market of the respective company, says Martin Steinbach, Head of IPOs and Listing Services in the Western Europe region of EY, in an interview with the FAZ where I go public first. If there is no such market in my home country, I as a company can consider listing myself on a stock exchange abroad. “
The biotechnology industry has received a lot of attention in the past 18 months. One wondered why the lighthouse company BioNTech chose to go public on Nasdaq in 2019 and not on the Frankfurt Stock Exchange. In 2020, the vaccine manufacturer CureVac followed to New York. Not an easy undertaking, as there are sometimes high hurdles associated with going public in the United States. “Many foreign companies that go public in the United States choose the indirect route via depository receipts, also known as ‘ADR’, which are issued by American custodians who hold the company’s actual shares,” explains Philipp Suess, Co-head of Goldman Sachs’ equity markets operations in Germany and Austria.
“In this form, the stocks have no access to indices. If a company should strive for this, it would have to carry out a direct listing, ”explains Suess. This requires either the legal form of an American stock corporation or the Dutch company form “NV”. In addition, a significant part of the administration must be based in the United States, and there are higher requirements for disclosure requirements, Suess continues to consider.
In light of these difficulties, you need compelling reasons to nonetheless list your stocks in America. “On the one hand, this can be attractive if a large competitor in the respective stock market has a pull for the entire industry,” says Suess. “On the other hand, it is a consideration if the current or future sales are mainly generated in a foreign market. The Prada IPO in Hong Kong was an example of this. “
The biotechnology industry affects special factors in IPOs. In the course of the new economy, there were many start-ups in this sector. Like many young companies at the time, they disappeared when the dot-com bubble burst. At the same time as this rise and fall, the financial sector developed competencies for biotechnology, which were not profitable due to high costs and long development times and which subsequently fell victim to cost-cutting measures in Europe.
Joachim Rothe, managing partner of the venture capital company LSP, equates this time with a nuclear winter. “It took ten years for something to stir again on the European market. We now have a good relationship here again in terms of supply and demand for financing young companies in the early phases. For IPOs, however, we primarily look to America, ”he says.
Germany offers capital for young, innovative companies
There the infrastructure could be preserved and the supply of institutional capital was greater. “This is why biotech companies feel at home in America,” explains Steinbach. “There you can count on analyst expertise and place your ‘equity story’, i.e. the growth story of your company, with investors who you understand. As a result, 90 percent of all biotech IPOs take place in America. “
Apart from this sector, fewer and fewer European companies are looking to foreign stock exchanges. This is also due to the harmonization of the European capital markets, says Steinbach. On this basis, mostly Anglo-Saxon institutional investors can support companies as anchor investors in their IPOs. This became visible at IPOs of technology-heavy companies like About You or Suse this year. These IPOs were supported by such investors, but took place in Germany.
“This is a positive development that shows us that Germany, like the United States, offers capital and growth opportunities for young, innovative companies,” says Suess. Steinbach still sees room for improvement in Germany: “We are a rich country and an innovative country. Unfortunately, it is often difficult to reconcile these two advantages.
The best way to do this would be through the capital market, but many medium-sized, semi-institutional and private investors miss IPOs in up-and-coming companies. The information requirements are too complex so that advertising for these investors is not worthwhile. With a view to the Bundestag election, it would make sense to take another thorough look at the German Stock Corporation Act, the original version of which dates from 1937. “