Why German companies like Birkenstock are going public in the USA and what that means for the German financial world

Why German companies like Birkenstock are going public in the USA and what that means for the German financial world

Why did Birkenstock go public in the USA as a German company?

By going public, companies want to raise money to finance growth, innovation and employment. At Birkenstock, New York was chosen because the capital market there is best developed and the company wanted to appeal to investors who best understood the business model with the “Initial Public Offering” (IPO) in the USA. In addition, a major role was played by the fact that the USA is one of the most important sales markets for Birkenstock, and the label developed traction in New York as the fashion capital of the world. With the IPO, the brand will gain even greater visibility - also with regard to potential customers.

Is Birkenstock the first company from Germany to go public in the USA?

In the last three years, in addition to Birkenstock, seven other German companies have chosen the USA as a stock exchange location. That is around a quarter of all German companies that went public during this period. The US quotations of the Mainz vaccine manufacturer BioNTech and the Munich air taxi developer Lilium are a little further back. These two examples make it clear that the US stock exchange NASDAQ is particularly attractive for companies in the high-tech sector.

Why are German companies drawn to the USA?

In the USA there is much more money available on the capital market to finance business ideas. The more money there is on the capital market, the more likely institutional investors are to specialize and build up expertise, for example in various technology areas. This knowledge is crucial in order to be able to assess the chances of success, especially in complex business models such as vaccine production or the development of air taxis. In addition, the huge US capital collection agencies, including pension funds in particular, with their broad portfolios are also more able to absorb losses in special segments. In the race to produce the corona vaccine, some companies fell by the wayside and were unable to meet the expectations of investors.

Where does the money come from in the USA?

In the USA, stocks play a much larger role in retirement planning than in this country. This ensures that pensioners can improve their standard of living in old age through returns from their stock investments. The huge pension funds that manage people's retirement savings also invest some of it in the domestic capital market. The Calpers pension fund, for example, which oversees the pensions of more than two million public sector employees in California, had invested half of its assets under management amounting to 420 billion euros in stocks at the end of 2022. For comparison: the assets in German company pension schemes total 672 billion euros.

What has to happen in Germany so that the stock exchanges become competitive?

As in the USA, stocks must become an integral part of German retirement provision. In this way, on the one hand, our statutory pension can be made financially future-proof. On the other hand, the emerging pension funds can give the stock markets in Germany momentum with new additional capital. Politics must finally set the course for this. Important Berlin projects such as generational capital, the planned capital stock in the statutory pension, must not remain piecemeal. Stocks must also become an integral part of private retirement provision. The focus group on private pension provision set up by the federal government has brought together important approaches. These suggestions must now be implemented boldly.
According to a report by amp.focus.de