In Germany the average age of a firm that carried out an IPO between 1975 and 1984 was
53 years. While the average IPO volume during the 1980s was nearly € 40.5 million, this average
increased to about € 102 million (€ 83 million excluding Deutsche Telekom) between 1990 and
2000.8 This contrasts with an average age of about 10 years and an average IPO volume of
approximately € 64 million (excluding T-online) for firms that listed at the Neuer Markt between
1997 and 2001. Moreover, firms going public at the Neuer Markt were significantly smaller, had
higher sales growth, and higher market-to-book ratios compared with the IPOs on the established
segments (Kukies, 2000). Given the different aims of the different segments, this is reassuring.
However, the difference in characteristics is striking in international comparison. In the 1980s,
the average listed German firm was almost four times older at the time of listing than the average
UK firm, and it raised on average three times more new equity than a UK firm. This marked
difference is not reflected in the listings at the Neuer Markt, when compared to Nasdaq, where
firms on average were about 7 years old and raised equity of about € 148 million in the year
2000.
Indeed, before the Neuer Markt came into being the typical firm that carried out an IPO in
Germany was a rather well-established firm in a mature industry. This result is puzzling as
raising equity is arguably of less importance for these firms than for young and growing firms.
Costs of Initial Public Offerings
As will be discussed in greater detail in Section 4, the market for lead underwriters is
highly concentrated in Germany. It was dominated by Deutsche Bank from 1959 to 1998 as the
lead underwriter in 30% of all IPOs, making more than 30% of the total gross proceeds
(Langemann, 2000, p. 29). Moreover, between 1990 and 1996, the lead underwriter was one of
the five major banks (Deutsche Bank, Dresdner Bank, Commerzbank, BHF-Bank, DG Bank) in
73% of all IPOs.
Even though firms were free to choose the method of going public, until 1994 issuers used
only the fixed price method, in which banks perform the intermediary role, with all applications
8 DAI-Factbook. Of the 144 public offerings in the UK in 1985, 46% had a volume of less than € 5 million and
14.5% had a volume of less than € 2.5 million. (Investor’s Chronicle, 17.1.1986, 37-41, as quoted in Weichert,
1987, p. 146.)