Air Berlin IPO in Germany stumbles

The IPO of Air Berlin, a popular discount airline company, was (and actually is still) supposed to be one of the major IPOs this year in Germany. But it stumbled somewhat. The initially targeted market capitalization was ca. 800-900 Mio. Euro, now after difficulties to attract enough investors and very critical voices from the funds managers, the price building range and the number of offered stocks were reduced considerably. In two days the company will finally be launched on the Frankfurt Stock Exchange and capitalize at about 400 to 600 Mio. Euro. (second number after full Greenshoe).

Why am I talking about it?

First it is quite an issue in Germany. Though secondly, more important, I consider the IPO market can often give some valuable hints on the overall conditions of the stock market.

My personal opinion is supposedly not exactly the common "wisdom" on this issue:

The analysts and stock market observers use to see in increasing IPO activity positive signs for the bourse climate. I am at least not that definite: IPOs are contrariwise unfavorable, because they take off the liquidity. Liquidity that otherwise could have been invested in the listed stocks.

They tell us, IPOs indicate the demand capability of the market. I don't love great demand indications - for the present moment it is of course good for the stocks as a whole; but it indicates also strong gear and investor activity. Demand now does not indicate demand tomorrow.

Of course there is a very fine edge, where positive interpretation can turn negative.

After this concrete story, I am more reassured about the market conditions than concerned about demand weakness. The investors do obviously some due diligence, do not buy blindly, there is no euphoria.

The time to be cautious will come, when all IPOs are 20fold oversubscribed and double digit gains on the first trading day are called disappointment.


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