BORNHEIM, Germany ¿ Deutsche Bvrse AG, which runs the Frankfurt Stock Exchange and Frankfurt¿s Neuer Markt, presented new rules for the delisting of companies from the Neuer Markt. The new rules are expected to sharpen the exchange¿s profile as a market for growth stocks.
The new rules and regulations will go into effect on Oct. 1, said Deutsche Bvrse, the German Stock Exchange.
Criteria for delisting are low share price, low market capitalization and insolvency.
The new rules for delisting as they relate to market value draw the line at a daily average price of EUR1 and a market capitalization of EUR20 million (US$17.5 million).
If a company falls below both these thresholds on 30 consecutive trading days and fails to exceed both of the values on at least 15 consecutive days in the next 90 trading days, Deutsche Bvrse will delist the company from the Neuer Markt. The company will be delisted from the segment one month after the announcement is made by Deutsche Bvrse.
As it relates to insolvency, the rules come into effect when insolvency proceedings are opened against a company¿s assets or are dismissed for lack of assets. Under the new rule, the German Stock Exchange requires the companies to report insolvency proceedings without delay. The exchange then will publish the delisting and take the company off the market one month later.
Companies delisted from Neuer Markt do not lose their admission to be traded and can continue to trade in the second segment (Geregelter Markt) or third segment (Freiverkehr), the German Stock Exchange said.
The German Stock Exchange also fixed new standards for the quarterly reports of companies listed on the Neuer Markt, requiring them to provide additional information as of the third quarter. The German Stock Exchange expects the moves to improve transparency and comparability of data.
The new rules are expected to improve new market¿s reputation, which was suffering among the German public.
The Neuer Markt, which lists about 340 companies, lost about 80 percent of its value last year. The market¿s biotech index was pulled down 65 percent. About 30 of the companies currently would not meet the new demands. About one dozen companies currently are insolvent.
¿A minority of stocks [with bad reputations] have received a lot of media attention,¿ said GPC Biotech AG¿s chief financial officer, Mirko Scherer, who added that quality stocks might have suffered through this negative reputation.
But improving the new rules may not be enough to regain its reputation, said Friedrich von Bohlen, CEO of Heidelberg-based LION bioscience AG.
¿The rules still leave unaffected willful misconduct,¿ von Bohlen said. ¿I think that we could even improve more if rules were more strict, more harmful for willful misacting individuals, and closer to the rules of the [U.S.] Securities and Exchange Commission.¿
Dave Lemus, CFO of Martinsried-based MorphoSys, agreed.
¿Perhaps more needs to be done, particularly in the area of prosecution where fraud is involved,¿ Lemus said. ¿The market needs to get a clear signal that fraud will be dealt with promptly and harshly.¿
Scherer considers the new rules to be a positive signal for the market. ¿We won¿t see an immediate uptake at the market. But we clearly think that mid- and long term this is positive news for stabilization of the market,¿ he said.
Von Bohlen is skeptical about the new rules achieving their goal. He expects them to improve short-term survival strategies, rather than long-term value-creating business tactics and strategies. ¿Therefore, I think that these rules are not more than a first step of hopefully more to come in the near future,¿ he said.