In the month before Germany’s September election, it’s hard to tell how much of what politicians are discussing is actually likely to happen and how much is just a vote-grabbing attempt. That’s why we’re going to hold off taking the news that government representatives are in talks to re-establish the country’s stock trading platform for startups too seriously for now.
German business publication Handelsblatt reported that German Economics Minister Philipp Rösler met with Reto Francioni, CEO of German stock market operator Deutsche Börse, earlier this month to discuss the proposed startup stock exchange. Deutsche Börse apparently supports the plan. The publication also wrote that in June this year talks were held between government officials and representatives from German startups and Deutsche Börse to discuss the new market. A German startup stock market could be running by mid-2014.
Startup lobbying group Bundesverband Deutsche Startups has been pushing for this kind of stock exchange for some time and also met with members of parliament and the Deutsche Börse in June.
Back to the old days of Neuer Markt?
Up until 2003, shortly after the collapse of the dotcom bubble, Germany had a startup stock market called Neuer Markt. In 2000, during the peak of trading, 140 companies were traded on this stock exchange.
As for the new stock market, Handelsblatt reports that the government will either lower entry standards for startups to Germany’s current stock markets or create a new market with less stringent regulatory requirements. It’ll be aimed at companies with revenue between €30m and €50m, which employ between 100 and 500 staff members.
Speaking at the Heureka industry conference earlier this year, German serial entrepreneur Stephan Schambach, who has seen two of his companies IPO in the US, spoke about the benefits of the Neuer Markt and the need for it to be re-established: “(It) created a valid business model for VCs where startups were founded and funded properly, so they could build their own technology or service. The best of them could go public and provide a liquidity vehicle for the VCs plus have a currency to continue to grow and acquire other companies.”
A German startup stock exchange would be “the single best thing that could be done for entrepreneurship in Germany”, Schambach said.
However, Neuer Markt was also plagued with troubles and scandals – not only did many private investors lose out big when the stocks crashed, but some trading companies were also found to have faked their numbers.
Schambach assured us that these issues were from 10-12 years ago and that the situation is different now: “There are much more stringent regulations, they are much more disciplined now, there are better laws and better enforcement… I think if everyone comes to the table – all the stakeholders like Deutsche Börse, the investment banks, VCs, startups – I think it could be re-established,” Schambach said.
As for the risks that the new stock market might pose for private investors, Bundesverband Deutsche Startups spokesman Florian Noll told Manager Magazin that they’re not the target. Instead, the market would aim to bring more institutional investors into German companies.
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