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BRAIN IPO involves retail investors

A commentary by Prof Dr Wolfgang Blättchen

With a performance of minus 12% on the Dax, the stock market put a damper on the mood of many investors right at the start of 2016. At more than 30 points above the level at the end of 2015, the volatility indicated by the VDax also rose sharply, making IPOs difficult if not impossible in the eyes of most investment bankers.

First IPO

Nevertheless, BRAIN was the first German bioeconomy company and therefore also the country’s first industrial biotechnology company to announce a successful initial public offering (IPO) with a fully subscribed capital increase on the evening of 3 February. This, by the way, was not only the first IPO of the year in Germany, but one of the first worldwide. And in this sector, to boot. Since the last biotech IPO on the Deutsche Börse stock exchange took place almost 10 years ago, potential German issuers in this sector were convinced it would be better to launch an IPO abroad, whether on the Nasdaq, like Affimed and Innocoll, or on Euronext, like Probiodrug and Curetis. All this despite the fact that the last two years were rather conducive to IPO business, by German standards. So why was BRAIN successful both in Germany and on the Deutsche Börse stock exchange? Because what counts first and foremost are the investors. And for them, the stock exchange is primarily a trading place. What is important is the story, the management, the rating and the prospects. BRAIN managed to convince investors in all these respects. Other convincing factors were its shareholder structure consisting of the family office of MP Beteiligungs GmbH, the MIG Fonds that is oriented towards private investors, founding and managing shareholders.

High proportion of private investors

A large number of private investors (almost 20% of the order book) subscribed to the share. Deutsche Börse and the share issuer provided them with specific subscription options. This group of persons included employees, friends and family, and investors who were aware of the company’s familiarity rating. These channels are very seldom used for IPOs in Germany because the large investment banks have completely forgotten about them, whether out of legal or economic considerations or because they are unaware of their benefits for a stable and more price-elastic shareholder base.

Long subscription period

Whereas Americans aim for private investor ratios of more than 20% (as used to be the case in Germany too), the French and the British tend to aim for 10%. In Germany, banks announced 2% for Zalando, and even that was probably unusually high by comparison. The long subscription period and the involvement of different sales channels, combined with a privileged minimum tranche, made crucial contributions to the successful placement. For the German capital market, this hopefully marks the beginning of a renewed willingness to grasp opportunities and to finance growth not just in a small institutional circle but also in connection with IPOs.

Parts of the article were published as a guest article by Professor Blättchen in “Börsen-Zeitung” (newspaper for the financial markets, Issue 26 dated 9 February 2016, p. 18).

Wolgang Blaettchen
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​Prof. Dr. Wolfgang Blättchen

Prof Dr Wolfgang Blättchen is managing partner of BLÄTTCHEN FINANCIAL ADVISORY GmbH, Leonberg, and since 1985 has been involved as an independent management consultant in raising equity and long-term loan capital on the capital market, and in participation and incentives programmes for executives. He also acts as a contact for the stock exchanges Neuer Markt (1997), Entry Standard (2005), bondm (2010) and Prime Standard Anleihen (2011). BLÄTTCHEN FINANCIAL ADVISORY is a bondm founding coach in Stutt- gart and a listing partner in Frankfurt.

The bioeconomy has potential – now on the stock exchange too

A commentary by Sven Kapell, Managing Director of Oddo Seydler Bank AG

BRAIN’s initial public offering showed that a company can make it to the stock exchange even in difficult market phases. However, several conditions need to be in place: intensive preparation, a convincing IPO candidate with an attractive equity story and trusting cooperation between the company and the bank that supports the IPO. 

As far as the bank is concerned, there are three key areas: corporate finance, research and distribution. Months before the planned IPO date, it is important to prepare the company’s management for the forthcoming process and to hold initial talks with potential quality investors. It is worthwhile to have experts with the relevant industrial expertise on the corporate finance team.

In these informative talks (known as pilot fishing), it is crucial to find the right mix of specialists and generalists. This is the only way to develop a well-founded and reliable feeling for the market. 

Importance of investor relations

During these personal exchanges, the aim is to pay attention to investor feedback, to listen to where their interests lie and where they see the key assessment criteria. The bank and the company use this information to fine-tune the equity story. Early contacts with investors maximise transparency and transaction security.

Red and white biotech

Whereas investors in the red biotech sec- tor are mainly specialists and have a high degree of expertise, white biotechnology enterprises, such as BRAIN, can contact a larger proportion of generalists. The bioeconomy is rightly considered a sector that holds above-average potential. The respectable number of retail investors at BRAIN’s IPO is good confirmation of this. Both investor groups, specialists and generalists, have different requirements to be met by the company’s man- agement and the bank. In talks with specialists, it was useful to have scientists from this sector (including one with a doctorate in biochemistry) on Oddo Seydler’s distribution team. That made sure everyone was speaking the same language.

Role of analysts

Research plays a key role during the process. The bank’s analysts produce an in-depth report on the company and transmit it to a large number of investors. In the case of the BRAIN IPO, this included some 1,200 institutional investors throughout Europe. This was followed by many talks between analysts and in- vestors to “educate” the latter about the report and the company. The reputa- tion of the analysts at Oddo Seydler made a major contribution to the successful IPO. Oddo Sydler’s research in healthcare/biotech is considered leading in Europe and has received a number of awards. The results of the analysis there- fore benefit from a high level of market credibility.

Offer phase

During the offer phase, BRAIN’s management went on a roadshow to meet some 100 investors in nine European finance centres for individual talks or group presentations. The final plan for the roadshow and the choice of target investors were delayed to enable the results of pilot fishing and investor education to be best taken into account.


Volatile markets are no reason to stop well- prepared quality companies from going public. BRAIN’s IPO is proof of this. It also shows that the investor base for biotech (both red and white) in Europe has deve- loped. Frankfurt has rightly rejoined the ranks of interesting trading places.

Source: transkript (Issue 3/2016, p. 9)

Sven Kapell
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Sven Kapell

Sven Kapell is an experienced banker in the primary equity business. The investment banking and corporate finance sector has been his playground for over 20 years. Kapell joined Oddo Seydler Corporate Finance in July 2014, where he is responsible for activities in German-speaking equity capital markets. Oddo has strength- ened its position in this field by acquiring the BHF Bank. Between 1995 and 2014, Kapell held various posts at Deutsche Bank, lastly as Director, Equity Capital Markets. He supported transactions at Wincor Nixdorf, MTU Aero Engines, Praktiker, Compugroup, Aurubis, Postbank and Deutsche Telekom. At Oddo Seydler, he provided backing for BRAIN’s IPO. Kapell holds degrees from the universities of Barcelona, Michigan (USA) and Kiel. (Source: Börsen-Zeitung, 10 February 2016)

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