According to the textbook, there is a lot to be said for going public: companies can get fresh capital on the stock market – for growth and to make themselves less dependent on bank loans. Less wealthy citizens can also share in their success, because shares are usually available for little money. Ironically, however, Theodor Weimer, the head of Deutsche Börse – a company that is itself listed on the stock exchange – apparently no longer really believes in the advantages of IPOs. “The basic idea, you go public to get growth capital, is worth less and less,” said Weimer on Monday evening at the International Club of Frankfurt Business Journalists (ICFW). “Companies that are good also get private capital,” says Weimer.
Private capital, these are financial investors, in the technical jargon private equity. These funds buy what they consider to be undervalued companies and often turn them inside out in quite violent ways. Unlike on the stock exchange, however, it is usually wealthy private investors who benefit from this. And when things are going badly, financial investors sometimes get uncomfortable. Nevertheless, many entrepreneurs considered private equity to be more attractive. “Anyone who takes a company public today says: What am I doing to myself? My salary is in the press, it’s all highly regulated, I have to submit quarterly reports every three months,” said Weimer. “Unfortunately, I’m not the marketing pope for IPOs.”
In fact, not only Frankfurt, but many stock exchanges worldwide, have been experiencing a decline in stock exchange listings for years. Most recently, around 430 companies were listed on the stock market in Germany. 20 years earlier there were more than 700. In 2022, according to the German stock exchange, trading in twelve shares was stopped. There were only four IPOs. Recently, for example, the owners of the traditional Hessian heat pump specialist Viessmann made a name for themselves. They preferred to sell their company to an American competitor instead of simply raising capital on the stock exchange while retaining control of the company. Or the Wiesbaden real estate bank Aareal, which has just been taken over by US financial investors and will probably be delisted shortly. A major setback for the Frankfurt financial center was the withdrawal of the most valuable Dax group, Linde, which prefers a listing on Wall Street. The Mainz-based biotech company Biontech – known for its vaccine against Corona – chose Wall Street for its IPO in October 2019 and avoided Frankfurt. There you have better access to specialized investors.
“The real driver of stock culture is the state”
Of course, he does not want to speak out against stock market listings, said Theodor Weimer, former head of HypoVereinsbank and head of Deutsche Börse since 2018, but he knows from countless conversations how bad the position of the stock market is now. “There is too much private capital and many companies find it nicer”. What’s more, Weimer is certain that companies often achieve higher valuations when they are sold to private equity. However, less wealthy people would then no longer be able to participate in the success of the company. After all, anyone who invests in private equity often has to put more than 200,000 euros on the table. “It’s actually unbelievable that a few get the good deals, and the ‘ordinary mortals’ don’t have access,” says Weimer, who will be leaving Deutsche Börse at the end of 2024 for reasons of age.
Incidentally, organizing a general meeting is the smallest problem for listed companies, said the manager, who revealed himself as a friend of the controversial new format of the digital general meeting, which many German investors reject. “It’s not my job to promote the face-to-face AGM,” he said. Annual general meetings have little to do with stock culture. Countries like the USA or Great Britain with a strong equity culture would also not attach great importance to general meetings being attended. “They don’t have that cinnabar there,” Weimer said. The actual driver of a stock culture is the state, if it changes its basic understanding of how pensions are financed via the capital market.