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 -Methods to Market

 
 
 

 -International Markets


Introduction

Market Structure

Listing Requirements


The Costs of Listing

 

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The German Stock Market
There are a total of nearly 900 companies listed across German with a total market capitalization of 1.2 trillion US$. A total of 22% of the listings are from outside the EU.

We can offer a 'Start-to-Finish' solution for listing in Germany.

Experienced Lawyers and Auditors
We refer you to experienced U.S. lawyers and auditors that have worked with many successful U.S. listed Chinese companies.

Public Shells
We provide clean public shells from our own inventory or from only the most reputable sources.

Financing
We work closely with clients to develop a realistic fund raising strategy and then help raise the necessary capital.

Investor Introductions
We have relationships with investors and fund managers that are specifically looking for Chinese and other Asian investments.

Transaction Completion
We oversee the entire going public transaction from start to completion.

 

See Chinese Companies on the German Stock Exchange

Introduction
Although the German stock market is strongly dominated by the Frankfurt stock exchange, it in fact comprises seven regional exchanges (see box 1). The other German exchanges can be of interest to some foreign investors and companies thanks to the special features they offer market participants (more information about regional exchanges’ features are available on the exchanges’ websites)

 
Market Structure- Prime and General Standard
The German equity market is divided into three so called traditional market segments: The Official Market (“AmtlicherMarkt”, high standard listing requirements), the Regulated Market (“GeregelterMarkt”), and the Regulated unofficial market (“Freiverkehr”, low standard listing requirements). Building on this basis, the biggest German Exchange, the Frankfurt Stock Exchange (FSE) implemented a new structure for equity markets on 1 January 2003. The aim of the FSE in introducing this new market structure was to contribute to restoring investor confidence in the German stock market through high standards and the due enforceability of regulations. For this purpose, two new standards were introduced for companies admitted to the Official Market and the Regulated Market: The General Standard and the Prime Standard. While the traditional distinction between Official Market and Regulated Market relates to the ad mission process, the new segmentation refers to different disclosure standards.

The General Standard segment is aimed at smaller and mid-sized companies that predominantly attract domestic investors and are interested in a less expensive way of becoming and staying listed. Nevertheless, this standard requires companies to comply with the former statutory minimum requirements of the Official Market or Regulated Market segment. Reporting requirements include:
-Annual financial statements/six-monthly reports (interim reports)
-Publication of ad-hoc disclosures (required under the German Securities Trading Act) in German. The regulations for the second segment, the Prime Standard, go even further. This segment is intended for companies that wish to target international investors. These companies are required to meet high international transparency criteria over and above those set out by the General Standard:
-Quarterly reporting
-Application of international accounting standards (IFRS or US-GAAP)
-Publication of a financial calendar listing the most important corporate events
-At least one analysts’ conference per year
-English language for current reporting and for ad-hoc disclosures required under the German Securities Trading Act.

A listing in the Prime Standard segment is a prerequisite for inclusion in the DAX, MDAX, SDAX or TecDAX selection indices.

As the new Prime Standard regulations cover the market segments formerly envisaged for young and dynamic companies (“Neuer Markt”) and the smallcaps segment (SMAX) , the Deutsche Börse AG closed down these segments in June 2003. All the companies formerly listed in the Neuer Markt or SMAX have switched to the Prime Standard or the General Standard.

 
Listing Requirements
Listing rules and regulations vary substantially among the different segments. Box 2 and box 3 indicate the most important conditions concerning listing in different segments and standards at the Frankfurt Stock Exchange and in selected segments of the other German exchanges (e.g., the size of the issue or the required documents). For admission to the General Standard, companies are required to comply with the statutory minimum requirements of the Official Market or the Regulated Market. Companies that wish to be listed in the Prime Standard must also fulfill very strict reporting requirements in order to provide maximum transparency and protection to international investors. Detailed information on the listing requirements of the other German stock exchanges is available on the respective exchanges websites.

 

 Box 2

Statutory Minimum Requirements

 

Amtlicher Markt

(Official Market)

Geregelter Markt

(Regulated Market)

Freiverkehr

(Regulated Unofficial Market)

Company’s minimum age

3 years

--

--

Volume issued

Expected market value: €1.25 million

Total par value minimum: €250,000

--

Minimum number of shares

10,000

--

Share classes

Ordinary shares, preference shares

Portion of shares that are widely held

A minimum of 25%

--

--

Approval documentation

Listing prospectus:  Detailed information about the company (past 3 years)

Report: Less detailed information than in the official market

Report: Less detailed information than in the official market

Retention obligation for existing shareholders

--

 

--

--

Legal basis

Stock Exchange Act (Sections 30 ff.), Stock Exchange Listing Directive, Offering Prospectus Directive

Stock Exchange Act (Sections 49 ff.), Exchange Rules and Regulations, Offering Prospectus Directive

Third-Section Guidelines, Section 57 of the Stock Exchange Act

Other

Trade monitoring (Trading Surveillance Office)

Reporting Requirements

Annual financial statements/six-monthly reports(interim reports), publication of ad-hoc disclosures(required under the German Securities Trading Act) in German

 

Annual financial report required

Organised market under the provisions of Section 2 Paragraph 5 of the Securities Trading Law

Yes

Yes

No

 

Box 3: Listing Requirements for Special Segments (examples)

 

 

Praedikatsmarkt Munich

Start Up Market Hamburg

4-X Stuttgart

Prime Standard

Deutsche Börse AG

Volume issued

Total par value minimum € 250,000

Total par value minimum € 250,000 for the first 3 years

 

Total par value minimum € 250,000

 

 

Companies have to comply with the statutory minimum requirements of the Official Market or the Regulated Market and additionally fulfill certain reporting requirements listed below

Minimum number of shares

 

--

10,000

10,000

Portion of shares that are widely held

A minimum of 25 %

A minimum of 25 %. After a 3 year listing period no free float requirements

 

--

Approval Documentation

Detailed information about the company

Retention obligations of existing shareholders

12 months

6 months

--

Legal Basis

Local exchange rules

 

--

Companies have to be admitted to the regulated market

--

Reporting Requirements

Quarterly letter to shareholders required

Quarterly reporting

Quarterly reporting


The Costs of Listing
Although, there are several types of costs which are typically associated with “going public”, these costs may vary significantly from company to company. Larger companies tend to have lower relative costs because a significant portion of the cost is independent of the emission volume (e.g. Public Relations costs). Typically, the costs account for 5-12 per cent of the proceeds of an issue.

Box 4 provides an overview of typical IPO costs. The numbers should, however, be viewed with caution as they vary widely depending upon the issuing bank and the characteristics of the company going public. After entering the market, the company must fulfill certain conditions (e.g., reporting). The costs of these activities, as well as indirect IPO costs such as the costs of underpricing, must be considered.