Second try

Brave New Stock Exchange

Stock exchange-reuters-CHANGED
German investors may be conservative, but German start-ups need financial support to flourish.
  • Why it matters

    Why it matters

    Lack of interest in up-and-coming firms by conservative German investors underscores the need to launch something like the NASDAQ exchange in the United States, a place where technology start-ups and other innovative companies could connect with new sources of capital.

  • Facts


    • Memories of the technology bubble and subsequent meltdown remain fresh in the minds of German investors.
    • Current financial conditions in German markets make it unlikely a technology success story like Apple, Facebook or Google could be writtten here.
    • By creating an exchange where investors would have access to solid opportunities would help many newer firms generate capital for growth.
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Germans are notoriously reluctant to invest in shares, something which is bad for saving and also a burden on the entire economy. The lack of stockholders willing to invest means poor prospects for companies that want to go public for the first time to seek financing for additional growth through stock sales.

This is particularly true for young, emerging technology companies, who have little trouble raising the first million, but struggle with finding the next, larger round of financing to keep growing. One reason for this is the limited exit options for venture capital firms and other growth financers of growth. 

So what can be done? One suggestion that comes up again and again is to create a new market platform focused solely on technology companies. This proposal reawakens a sense of dread in German investors, who recall only too well how efforts to create a new market at the start of the millennium resulted in a catastrophe for the German stock market. It was marked by an endless series of failures, mishaps and bad luck. It seems unlikely another go at creating a new market will suddenly turn Germany into a nation of bold investors.

Germany could use a technology index modeled after the American NASDAQ, specifically for young, fast-growing companies.

Essentially, it is the term “new market” that frightens people, who recall the explosion of the technology stock bubble. Perhaps instead of creating a new market for Germany, launching something similar to the NASDAQ security exchange in the U.S. would sound more reasonable. Germany could use a technology index modeled after the American operation: a market specifically for young, fast-growing companies that until now have often found their way into the capital markets in the United States instead of Germany.

German internet initial public offerings such as Zalando and Rocket Internet were, unfortunately, the exception and not the rule.

A German growth stock exchange would offer to investors a market with companies that are dynamic but also come with a significant amount of risk. This is something investors would certainly have to be aware of. There cannot be a maximum shareholder protection in a stock market devoted to up and coming companies. But where there is risk, there is also opportunity.

It is worth another try. If financial structures remain as they are in Germany, it will be difficult to imagine technology success stories like Facebook, Google and Apple happening here. But wouldn’t it be nice if the next challenger to the Internet top dogs didn’t come, as usual, from Silicon Valley but rather from Berlin, Munich or Frankfurt?


The author is deputy editor of the Handelsblatt financial pages. Contact the author:

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