DThe stock exchange floor is attracting companies again. After the technology company Schott published its plan for its subsidiary Schott Pharma, the tank gearbox manufacturer Renk and the shoe manufacturer Birkenstock are following suit – with the latter intending to be listed in New York.
The market is picking up after a long period of stagnation. In 2022, there was only one significant IPO in Germany, when Volkswagen brought its sports car manufacturer Porsche to the market. This year, United Internet subsidiary Ionos and Thyssenkrupp’s hydrogen subsidiary Nucera followed suit. The market was burdened by high inflation, and investors are now more interested in how potential IPO candidates can protect their margins in the face of rising costs. According to a survey by consulting firm EY, the global number of Initial Public Offerings (IPOs) in the first half of the year was 5% lower than the same period last year, and the total volume of emissions decreased by over a third to $61 billion.
Drei Jahre Aufschwung
The investment bank Morgan Stanley is optimistic. According to the IPO chapter of a presentation on IPOs, mergers and acquisitions, and private equity, presented by the German management in Frankfurt on Tuesday, a wave of IPO activity typically lasts about 36 months, while a downturn phase lasts about 28 months. „We are currently in the downturn cycle 29 months after the latest peak.“ Judging by the previous five cycles, a strong recovery can be expected in the coming year and the year after.
If European companies aim for an initial public offering in New York, it occasionally happens due to differences in valuation, measured as a multiple of operating profit. However, digital global stock trading evens out the situation, which means that „value arbitrage,“ exploiting valuation differences in different places, is no longer common. „The existence of value arbitrage has become extremely rare. Why? Because investors operate globally,“ said Thomas Thurner, Head of Capital Markets Business in the German-speaking region at Morgan Stanley. The expertise of investors plays a bigger role, both among bank analysts and among investors who rely on their analyses. It also matters if there is a broader „peer group“ in America, meaning a group of comparable companies against which investors can measure the newcomer.
Rückkehr aufs Parkett
The German stock exchange in Frankfurt has been chosen by Renk, the tank drive manufacturer, as its trading platform after more than three years. In 2020, the financial investor Triton bought the majority stake in Renk from the Volkswagen Group, presented a takeover offer to minority shareholders, and delisted the company. The goal now is to go public by the end of the year, as announced by the company on Tuesday. Typically, there is a gap of about four weeks between the official announcement of an IPO and the first day of trading, suggesting a possible IPO in October. Triton intends to sell existing shares but remain the majority owner of Renk. Citi, Deutsche Bank, and JP Morgan will be leading the IPO. Renk is currently experiencing a special boom. 70% of its business comes from supplying transmissions for tanks or ships for the navy, while the remaining portion is from civilian business such as supplying compressors with transmissions. Bankers have recently estimated the potential valuation at €2.5 billion.
Aufbruch nach New York
According to information from financial circles, the sandal manufacturer Birkenstock is planning to officially announce its stock market debut in the coming days. This will be done by filing with the US Securities and Exchange Commission (SEC), as Birkenstock has chosen New York as its stock exchange. The target date is the week of October 9th. A long list of banks is involved in this project, with some now estimating the company’s total value to be in the tens of billions of dollars. This is significant for investment banking rankings, which in turn are important for the banks‘ reputation. Leading the IPO are JP Morgan, Goldman Sachs, and Morgan Stanley.
According to a presentation for bond investors, which has been obtained by F.A.Z., Birkenstock nearly doubled its revenue from 2018 to 2022, from 648 million euros to 1.24 billion euros – with a 29 percent increase in the past year alone. The adjusted earnings before interest, taxes, and depreciation (EBITDA) were reported to be around 400 million euros. The financial investor L Catterton acquired the Linz-based company from private individuals only in 2021. Just at the beginning of this month, the pharmaceutical supplier Schott Pharma announced its long-awaited stock market debut. Among the upcoming stock market projects is the return of the perfume chain Douglas to the stock exchange.