Record IPOs

Germany's Dot.com Boom 2.0 Takes Shape

Johannes Bruder, COO, Oliver Samwer, CEO, Peter Kimpel, CFO and Alexander Kudlich.  Source: Reuters
Management board members of Rocket Internet, Germany's largest IPO in nearly 15 years: Johannes Bruder, COO, Oliver Samwer, CEO, Peter Kimpel, CFO and Alexander Kudlich, managing director.
  • Why it matters

    Why it matters

    A succesful listing of Rocket Internet may trigger other German online-focused firms to seek a public flotation and boost competition with U.S. rivals such as Google, Amazon and eBay.

  • Facts

    Facts

    • On Thursday, Germany will see the biggest listing of an Internet firm, Samwer brothers’s Rocket Internet, since the dot.com crisis, raising up to €1.6 billion ($2 billion).
    • Goodgame Studios, founded in 2009, was valued at €22 million in 2011, when the Samwer brothers took a 15 percent stake, Goodgame said.
    • Goodgame is a fast-growing maker of free games for smartphones, desktops and tablet computers, but is not listing this year, the chief executive told Handelsblatt.
  • Audio

    Audio

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As a child, Kai Wawrzinek started programming computer games.

Almost 30 years later, he heads a fast-growing maker of computer games, Goodgame Studios, based in Hamburg. With sales of €102 million ($129 million) last year, Goodgame, a maker of free games for smartphones and computers, is big, but wants to get even bigger.

Like many aspiring entrepreneuers in Germany these days, Mr. Wawrzinek may take his company public. He has ruled out an initial public sale of stock — for this year. But the lure of big, fast money is growing more tangible each day in Germany.

Tomorrow, Zalando, Europe’s largest shoe retailer, is expected to raise €605 million in its IPO. A day later, its former parent company, Rocket Internet, plans to raise up to €1.6 billion, the most since 2000.

“Today, there are a lot of Internet companies” preparing to go public, said Amir Darabi, an analyst at Bayerische Landesbank in Munich. “Before, there were no companies that were profitable. That’s different today.”

Stoked by relatively cheap money, and more risk-friendly investors hoping to get in on the ground floor of the next dot.com boom, Germany is at the advent of a sharp rise in IPOs which could nourish the country’s burgeoning start-up scene in urban centers such as Berlin, Hamburg and Munich.

In part, the boom is being fed by investors desperate for new, affordable and hopefully profitable start-ups.

“If you look at investors’ portfolios, there is a lack of Internet companies,” Mr. Darabi said.

While the rise in German IPOs has been marked — in number of deals and total amounts raised this year, according to Mergermarket, which tracks the industry — the quality of firms coming to market for the first time are much better than the original dot.com bubble that burst in 2000.

For one, companies, such as Zalando, Rocket Internet and Goodgame, have been profitable, at least sporadically.

 

Goodgames Users and Employees-01

 

The listings this week of Zalando and Rocket Internet, an Internet start-up incubator with stakes in more than 400 mostly loss-making companies, are being closely watched as a barometer of investor interest in German software and tech companies.

If Rocket Internet, which is majority-owned by three German brothers, Marc, Oliver and Alexander Samwer, succeeds in raising €1.6 billion, it will be the biggest IPO of an Internet firm since the sale of shares in T-Online International raised €3.1 billion 14 years ago.

Goodgame, which was founded by Mr. Wawrzinek, his brother Christian Wawrzinek and current finance chief Fabian Ritter, is funding its operations from its cash flow. In the past, it has borrowed €500,000 from a bank, which has been largely repaid, and received a €3.3 million cash infusion from the Samwer brothers’ investment fund, which in turn obtained a 15 percent stake in Goodgame.

At the time of the Samwer brothers’ investment in 2011, Goodgame had a total value of €22 million, Mr. Wawrzinek said in an interview with Handelsblatt Global Edition on Monday.

While the rise in German IPOs has been marked, the quality of firms are much better than the original dot.com bubble that burst in 2000.

The firm’s success has not gone unnoticed. It has been approached by investors repeatedly over two years but has turned them down, Mr. Wawrzinek said.

“We’ve gotten weekly requests in the past two years from people who wanted to participate in our growth. But the deciding factor, as Christian has said, is that we have a long term vision,” Mr. Wawrzinek said.

As long as the firm refrains from listing or seeking investors in a different way, the three original founders and the other management board members will keep their stake of about 85 percent.

Some might call Kai Wawrzinek a whizkid. As a teenager, he won a national mathematics contest in Germany, and belongs to Mensa, the association of people with extraordinarily high intelligence. He is not short on ambition either. He wants Goodgame, which makes money by selling additional game features on top of the games it gives away, to join the ranks of the world’s biggest game makers by 2020, joining peers such as French rival Ubisoft and Electronic Arts of the United States.

“We have a few large technology firms in Germany, Deutsche Telekom or SAP for instance. But a lot more are possible,” Mr. Wawrzinek said. “The most truly large Internet companies are based in the United States. A few are based in Europe. One could say we have acted a little slowly here.”

Planned public listings-01

With a set of addictive games, determination and a little luck, Goodgame could join the crowd.

So far, demand for planned listings of other firms appears to be strong.

Zalando said on Monday it planned to sell its shares at €21.50 each, near the top end of  its €22.50 range. Demand was “over-subscribed well in excess of 1o times,” Zalando said in a statement. Rocket Internet, also saying it was responding to strong demand, brought forward its listing by a week to Thursday.

Two other German technology firms, cable operator Tele Columbus and online market place Scout24, have said they are planning listings later this year.

Amid the flurry of IPOs, Goodgame Studios’s Mr. Wawrzinek is keeping a cool head.

“We are not planning a stock listing this year, whatever the rumors are saying,” Mr. Wawrzinek said. “What the future will bring in the next few years is hard to predict. We don’t want to speculate. Currently, we are well-equipped and all is functioning well.”

Gilbert Kreijger is an editor for Handelsblatt Global Edition in Berlin, where he covers companies and markets. Lára Hilmarsdóttir and Franziska Scheven also contributed to the story. To contact the author: kreijger@handelsblatt.com

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