The idea of putting the name for a new stock-market segment out to a competition was probably not so bad after all. This gave Deutsche Börse an early read on the mood and let it observe the public discussion. After the bitter experiences it had had with the Neuer Markt, it wanted to feel its way cautiously toward a replacement for the current Entry Standard for shares and corporate bonds.
Back then, around the turn of the millennium, many private investors too — dazzled by the internet hype and wild profit promises — had put their savings into the firms of the New Economy. People practically fought over the shares, even though even at that time market watchers were questioning the substance of many business models. It played out as it inevitably had to: the dot-com bubble burst, the money was lost, firms disappeared as quickly as they had risen, and after just six years Deutsche Börse closed the Neuer Markt chapter in 2003.
High demands on communication and transparency
So now a fresh start. 550 suggestions were submitted for the naming. And since the beginning of February it has been decided: the new segment is to be called Scale. Which, translated, roughly means frame, extent or benchmark, and sounds considerably snappier at first than the other segments of the Primary Market: General Standard and Prime Standard. But is the new framework also suited to restoring trust in the new „Neuer Markt“? Exchange chief Carsten Kengeter describes the general goal: „Small and medium-sized enterprises in particular will benefit from our new segment, because here the need for better access to equity capital is especially great.“ He also hopes for a boost to IPOs. Scandals are meant to be a thing of the past.
A range of safeguards is intended to prevent another bubble from forming or a repeat of the bad experiences with the Entry Standard. Prerequisites for admission are annual revenue of at least ten million euros and positive equity. In addition, companies must demonstrate cooperation with a Deutsche Börse Capital Market Partner, who assesses their suitability for the segment and also supports the company after the IPO. Also mandatory are the research reports commissioned and paid for by Deutsche Börse, which are produced by Edison Investment Research and Morningstar. Christoph Gerlinger, head of Deutsche Startups Group, is convinced: „The new criteria help good issuers set themselves apart from dubious, undersized and immature companies, and thus make it easier for them to win investors' trust.“
7%
of Germans have invested directly in shares. This means that, as before, many people are passing up a great opportunity to grow their capital.
Share
Don't get swept up in the euphoria
The target audience is primarily smaller institutional investors, explains Deutsche Börse cash-market chief Hauke Stars. „But private investors are also meant to play a role and be able to make investment decisions more easily thanks to additional information,“ she said in an interview with Handelsblatt. She goes on to raise an important point: „Unfortunately, only seven percent of Germans are invested directly in shares. That means many people are passing up a great opportunity to grow their capital. Because over the long term, shares offer the best risk-return ratio — many studies show that.“
For all the euphoria and supposed safeguards, caution is called for. Investing in individual stocks or in a single segment always involves high risks. „An investment strategy should always combine various investment instruments — and do so globally,“ says Philipp Dobbert, chief economist at Quirin Privatbank. „Over the long term, you are far more successful if, as an investor, you choose exactly the level of risk — and thus the equity allocation — for building your own wealth that fits your own goals and needs from both a return and, indeed, a risk perspective.“
