Why The Frankfurt Stock Exchange – FSE Listings
In an international comparison, the Deutsche Börse (Frankfurt Stock Exchange) remains the most attractive listing venue for companies aiming for an IPO. Current studies compare the world’s primary market activities and terms for listing on the Frankfurt Stock Exchange to the leading international exchanges. The study analyzes terms for IPOs on the Frankfurt Stock Exchange and compares them with the stock exchanges Euronext, Hong Kong Stock Exchange (HKSE), London Stock Exchange (LSE), NASDAQ und New York Stock Exchange (NYSE). Almost every third listing of a company, which chose Deutsche Börse as a listing venue, was an Initial Public offering (IPO). This includes a first public offering of shares with an approved prospectus. Only 0.3 percent of all listed companies on the Alternative Investment Market (AIM) in London had an IPO at this venue. Sector focus is key to selecting a listing venue for an IPO – especially for companies from the emerging markets. The Deutsche Börse leads among companies whose business is in the alternative energies, high technology, chemical and industrial sectors. In alternative energies alone, 97.8 percent of the entire placed IPO volume has been placed on the Frankfurt Stock Exchange. Another key criterion is the durability of a stock exchange listing.
Deutsche Börse clearly stands out in this respect:
No company with an IPO in Frankfurt between January 2001 and March 2008 has become insolvent. The percentage of insolvencies for Euronext is nearly three percent and for LSE more than five percent. The proportion of delistings is also correspondingly high. The percentage of delistings on LSE is more than ten percent, while at Euronext it is almost seven percent, with no delistings from HKSE or rnrnFrankfurt Stock Exchange during the period stated. For the period from January 1999 to March 2008, Deutsche Börse received top marks as a listing venue in a global comparison. Companies benefit from the lowest capital costs and the highest liquidity. Subjects of the examination included the costs of market access, the subsequent costs for further capital increases and liquidity. Deutsche Börse’s Prime Standard and General Standard rank above the other “main markets”, with its Entry Standard also ranking above other alternative markets.
Today, with a total turnover of €5.2 trillion per year the Frankfurt Stock Exchange strengthens its position as the world’s 3rd largest trade-place for stocks and the world’s 2nd largest by market capitalization.
The city of Frankfurt has the unique distinction of being host to one of the first stock exchanges in the world. Owned and operated by Deutsche Borse, the Frankfurt Stock Exchange is the third largest trade-place for stocks in the world and the second largest in terms of market capitalization. There are currently about 6823 companies quoted on the Frankfurt Stock Exchange and the exchange enjoys an annual turnover of roughly 5.2 trillion euros. Most of the FSE’s trading takes place via a fully electronic trading system known as Xetra. This electronic system makes it possible for 15 different countries to trade on a single platform. Because this allows for countries to trade on the exchange without actually being in the country for floor trading, some 47% of those companies trading on the FSE are located in other countries. Those companies wishing to enter the Frankfurt stock market can choose from three different categories: Prime, General and Entry Standard. Entry Standard is of course, the easiest ways since Prime and General are regulated by the EU rules. Some examples of companies listed on the Frankfurt Stock Exchange are Nokia, Opel, Porsche, Daimler Chrysler and Hugo Boss Ag.
Germany enjoys one of the most highly developed market economies in the world and it is the largest economy in Europe. It also ranks fifth in the world in terms of purchasing power parity and GDP. The country’s economy is largely export-orientated and exports account for more than one-third of the country’s annual output. However, despite the fact that Germany enjoys such a high export rate, it suffers from low consumer confidence on a local scale. This has weakened the local economy somewhat, but he government is making strides towards alleviating the problem. Currently the services sector contributes the most towards Germany’s GDP with roughly 70.3% of profits coming from this sector. Agriculture in Germany is incredibly small with only 1.1% of the country’s revenue being generated by this sector and the remaining 28.6% coming from the industry sector. About 13% of the country’s population live below the poverty line and some 9.6% are unemployed. While these number are not all that good for a developed country, they are not that bad when compared to other countries.
Germany’s main industries are iron, steel, cement, coal, chemicals, machinery, motor vehicles, machine tools, electronics, food, beverages, shipbuilding and textiles. In 2005 $1.016 trillion was generated from exports while only $801 billion came from imports. This further shows how much more is generated from exports each year. The country’s main trade partners are France, the US and UK, Italy, the Netherlands, Austria, Belgium, Spain, Switzerland and China.
Why are companies actively seeking consultants for a public listing on the Frankfurt Stock Exchange (FSE) is because of the ability to raise from 2 to 15+ million Euros immediately thereafter from European pension funds, hedge funds, selling groups and private investors.
The total amount that can be raised will be based on the valuation of the Company. The financing occurs very quickly after trading commences on the Exchange. European private and institutional funds are actively seeking investments in newly listed public companies, and the process is rapid as compared to other Designated Offshore Exchange (DOE) venues.
A Frankfurt exchange listing is the first step on the road to becoming a public company, with the opportunity to dual-list in the future, either in the U.S. or Dubai.
The FSE Listings Benefits
There are numerous benefits to a Frankfurt Exchange listing:
- Increased trading volume and market capitalization,
- Addition of new shareholders,
- Capital raising opportunities,
- Raise brand or services awareness,
- No restrictions on insider sales,
- Becoming a truly global player,
- Sometimes only 4 – 6 weeks from application to approval for trading,
- Low cost to value realized and low annual fees.
In addition, further fundraising is possible through the listing, depending on valuation level of the client company.