Study confirms that Frankfurt offers highest liquidity and lowest capital costs/ Considerable IPO potential among German SMEs
Deutsche Börse offers companies the lowest capital costs among the world’s leading stock exchanges. This is the conclusion reached by an independent study presented by Professors Christoph Kaserer (Munich’s Technische Universität ) and Dirk Schiereck (European Business School ) at the German Equity Forum on Monday. Deutsche Börse offers the lowest capital costs in all three segments - Prime, General and Entry Standard - for both the actual IPO and for ongoing listing. Liquidity on the Frankfurt stock exchange is also higher than at the other trading venues.
The study confirms the results of a survey published by the professors last year. The current study compares the terms and conditions that apply to a listing with Deutsche Börse with those on the following exchanges: Euronext, Hong Kong Stock Exchange, London Stock Exchange, Nasdaq and the New York Stock Exchange. A total of over 2,200 IPOs were examined over the period from January 1999 until March 2007.
The attractiveness of the various exchanges for issuers was analyzed using a valuation system developed by the professors, which is based on eight criteria. These parameters measure a number of factors including the costs of market access, the subsequent costs for further capital increases and liquidity. With an overall score of 2.0, Deutsche Börse’s Prime Standard and General Standard come in 1st compared to the other main markets, followed by Hong Kong’s Main Board (2.9), the NYSE Large Caps (3.0), Euronext’s Eurolist (3.1), the LSE’s Main Market (3.4) and Nasdaq’s Large Caps (3.5). As far as the alternative markets are concerned, the Entry Standard is in pole position with an overall score of 1.9. It is followed by the NYSE Small Caps with a score of 2.6, Euronext’s Alternext (2.8), the Nasdaq Small Caps (3.0), the LSE’s AIM (3.4) and the Hong Kong Growth Enterprise Market (GEM) (3.5).
The total costs of an IPO in Frankfurt average 8.3 percent of the issue volume. Deutsche Börse offers significantly lower overall costs than Nasdaq (9.5 percent), London (12.6 percent) and Hong Kong (14.6 percent). The zero-trade ratio (ZTR) was also examined. This parameter shows the ratio of days without trading in a particular share to the trading days. A low ZTR means that trading activity is high. The study shows that Frankfurt has the highest liquidity in an international comparison, both among the main markets and in the alternative segment. The ZTR in the Prime Standard and the General Standard, as well as in the Entry Standard, comes in at 1.39 percent. By means of comparison, London’s Main Market scores 9.15 percent and its AIM 39.89 percent, while Hong Kong’s GEM also returns a far higher ratio with 33.42 percent.
Frankfurt’s Entry Standard also offers the lowest spreads, i.e. the difference between the buy and sale price, with 2.23 percent, compared with 4.15 percent on the GEM, 4.52 percent on Alternext and 7.22 percent on the AIM. The Prime Standard and General Standard also offer extremely low spreads at 0.62 percent, followed by Eurolist (0.71 percent), Nasdaq (0.74 percent), Hong Kong’s Main Board (1.04 percent) and the LSE’s Main Market (2.0 percent).
“The results of this independent study once again confirm Frankfurt’s attractiveness as a listing venue in a global comparison – for small, medium-sized and large companies alike”, said Rainer Riess, Managing Director, Cash Market Development at Deutsche Börse.
Deutsches Aktieninstitut presented a study on German listings at the Equity Forum. German SMEs show considerable potential for future IPOs. This is the main conclusion reached by a survey performed by Deutsches Aktieninstitut in cooperation with Deutsche Börse AG. All in all, around one quarter of the companies surveyed are either aiming to go public, or are at least considering an IPO in principle. “Compared to 2003, when we published the results of a similar survey, SMEs have increased their capital market focus considerably”, said Rüdiger von Rosen, Head of Deutsches Aktieninstitut. This is an encouraging sign for the acceptance of equities as a financing instrument.
Deutsche Börse and KfW Mittelstandsbank have been organizing the German Equity Forum twice annually since 1996. With over 5,000 participants, the German Equity Forum is one of the major capital market conferences for companies seeking equity financing.
