Eichel Hastens Retreat for German Firms

On his way home from World Bank and International Monetary Fund meetings in Washington, German Finance Minister Hans Eichel made a special pit stop in New York on Monday. He met with John Thain, the director of the New York Stock Exchange (NYSE), and appeal on behalf of German companies for laxer rules governing the process of "de-listing" from the exchange.

The reason is quite simple: While during the boom years of the 1990s German companies raced to list themselves on the NYSE, seeing it as a mark of prestige in an increasingly global economy, the effort has only proven worthwhile for a precious few. For the rest, trading on the NYSE has come at a high a price and they are looking to get out. The trouble is, strict rules and regulations make such a retreat extremely difficult.

Boom to bust

At the moment, 18 German companies are traded on the NYSE and NASDAQ, the United States' technology stock exchange. Deutsche Telekom, Siemens, SAP, Deutsche Bank and Infineon are among them.

However, the stateside adventure has proven costly for the majority of them, particularly smaller concerns. Despite the huge initial cost of getting listed -- for lawyers, consultants, etc. -- most of the German companies have found there's little interest in their stocks. For example, the German pharmaceutical company Bayer says just 80,000 of its stocks are traded each day, just 2.4 percent of the volume traded on the Frankfurt exchange (photo).

Perhaps German companies get lost among the nearly 2,700 companies traded on the exchange, or, perhaps most investors interested in German stocks prefer to buy them on the Frankfurt exchange, not in New York. Jürgen Kurz, a spokesman for DSW, Germany's leading association for private investors, said he strongly suspects it's the latter.

Whatever the reason, the cost of doing business in New York is proving too high for many German companies listed there, and many are now beating the drums of retreat.

"The majority are looking to get out sooner rather than later," Peter Wiesner, of the German Industry Association (BDI) told the German newsweekly Der Spiegel.

Their efforts, however, have been frustrated by strict regulations governing the process of de-listing. Eichel met with Thain to appeal for laxer rules.

Caught up in the red tape

Aside from worries that an en-masse retreat could send alarm signals off in the heads of investors, German firms looking to leave the NYSE have mostly been frustrated by a rule stipulating that foreign companies can only leave the exchange if fewer than 300 permanent residents of the US own the company's stock.

Tracking down stockholders to buy back their shares is both expensive and time consuming. Indeed, German companies may have found US residents none too interested in their stocks, but enough interest existed to put them over the limit. For example, financial services giant Allianz has 555,300 stocks owned by 1,760 Americans.

"It needs to be easier for German companies to leave the US exchange," Eichel told Train at their meeting, according to a spokesman for Eichel. German firms are hoping his words did not fall on deaf ears.