Stephane Boujnah, boss of European stock exchange group Euronext, is a big fan of German tech startups. “German technology companies are mushrooming,” he told Handelsblatt in an interview. He obviously has no qualms about going head-to-head with Deutsche Börse, the Frankfurt-based stock-exchange operator. If German tech companies want to go public in Europe and access a broad range of international investors, “Euronext is a natural European listing venue,” he said.
Euronext is launching a European technology drive to draw these companies into the fold. Listing requirements are fairly light for Euronext’s new Access+, a market segment founded last May, and which is geared towards start-ups and small- and medium-sized firms, or SMEs. Companies applying to Access+ need only two years of financial statements, a minimum floatation of €1 million in value, a listing “sponsor” who advises and assists the company, and a commitment to regularly communicate to the market.
Last March, Deutsche Börse set up Scale, its own separate market for SMEs, but Mr. Boujnah says it doesn’t fit the bill. Scale “does not necessarily match the needs of all fast-growing innovative companies,” the Euronext boss said.
Erik Leupold, Deutsche Börse’s head of pre-IPO and capital, firmly denies Mr. Boujnah’s claim. “As far as our listings are concerned, we are affordable, lean and efficient,” Mr. Leupold told Handelsblatt Global. Scale was “well-positioned to serve this market.”
Euronext is obviously vying with Deutsche Börse to lure tech IPOs, especially those which might have listed in London before Brexit
Scale’s founders are eager to avoid comparisons with the Neuer Markt, a stock market for tech startups set up by Deutsche Börse in the late 1990s. The dotcom boom saw prices on the Neuer Markt skyrocket, then spectacularly collapse, until the market was wound down in 2003.
This partly explains why Scale’s listing hurdles are more stringent than Euronext’s. Companies listing there must fulfil three of five minimum requirements for revenue, profits, workforce, stocks and market capitalization. The stock exchange provides two analysis firms to perform due diligence. The fees are higher, too: €5000 per quarter and a one-time sum of €20,000 to €89,000, depending on the company’s size.
Mr. Boujnah thinks that for many startups, Scale’s requirements are a bridge too far. “Many technology companies cannot comply with these rules because they are still growing and therefore require a lot of cash,” he said. He denied, however, that Euronext’s rules translate into lower standards, or risk inflating a new market bubble.
In recent years, Europe’s national governments have thrown their hats into the ring, with both the French and German governments expressing support for the sector and their respective exchange operators. Euronext, which operates stock exchanges in Paris, Amsterdam, Brussels and Lisbon, is obviously vying with Deutsche Börse to lure tech IPOs, particularly those who (before the Brexit vote, anyway) might have chosen London’s Alternative Investment Market for a listing. Earlier this week Euronext said it plans to open new offices in Frankfurt, Munich, Milan, Madrid and Zurich to support young, growth-oriented businesses.
Euronext is focused on stock markets and IPOs, and is particularly keen to attracted medical, biotech and environmental startups. Deutsche Börse, meanwhile, is stronger in derivatives markets and post-trade services.
The two companies’ different strengths have led some observers to speculate on a possible merger. But Mr. Boujnah poured cold water on the idea: “I’m not sure this would make sense at the moment. Why should we combine things to continue doing what we are good at?”
Michael Brächer and Andreas Kröner are financial editors in Handelsblatt’s investment team in Frankfurt. Jeremy Gray is an editor with Handelsblatt Global. To contact the authors: firstname.lastname@example.org, email@example.com