As of close of trading on 16 April the stock market history of the Metro retail group ended, a date aligned with the end of the public tender offer to shareholders. Metro, which was a Dax constituent, is not an isolated case. At the end of March, the Spanish company Grifols also announced a delisting tender offer to the few remaining Biotest shareholders. Earlier, on 11 March, the battery manufacturer Varta, which was undergoing restructuring, had already ended its existence as a listed company.

Further delistings are on the horizon. Gerresheimer is negotiating a takeover bid with financial investors – it would be surprising if an agreement on the offer price does not ultimately lead to a delisting. The manufacturer of special packaging for the cosmetics and pharmaceutical industries made itself vulnerable with a profit warning last autumn, which was followed by a brutal fall in the share price. Ceconomy, the parent company of the electronics retail chains Media Markt and Saturn, could also have its days on the stock exchange numbered. There is takeover interest from the Chinese company JD.com.

This development is part of a trend that has been ongoing for years. The number of publicly traded companies is falling both due to the subdued IPO activity in Germany, as well as delistings. In 2024, the German Federal Financial Supervisory Authority (BaFin) approved 32 public takeover offers, according to the latest Public M&A Report by law firm Noerr. This was the second-highest number since 2014 and an increase of eleven offers compared to the previous year.

The significant increase was primarily due to delisting offers. They increased from eight to 20. Fourteen of these offers were pure delisting offers, and in six cases, the offer was combined with a takeover bid. What is even more striking, however, is that there was no takeover bid last year that was not also linked to a withdrawal of the company from the stock exchange.

Marc Tüngler, Managing Director of the Deutsche Schutzvereinigung für Wertpapierbesitz (DSW), points to the Future Financing Act II (ZuFinG II), which in the end fell victim to the collapse of the Ampel coalition government. Tüngler is convinced that it has the potential to change the de facto defencelessness of independent shareholders that prevails under the current conditions. According to the proposed legislation, shareholders would at least have been able to have the appropriateness of the offer price reviewed via appraisal proceedings.

As a result, companies wishing to delist were urged to act quickly, as until now, only the volume-weighted average price of the last six months before the announcement of the delisting offer had to be offered as cash compensation. „This opens the door for major shareholders if stock market turbulence persists over a longer period of time, or company-specific causes slow down the share price for a longer period of time,“ says Tüngler.

Noerr partner Julian Schulze De la Cruz, on the other hand, says that there is no connection between the growing number of delistings and the ZuFinG II. In his opinion, the lack of liquidity beyond the Dax40 is the core problem. „Small impulses are enough to send a share into the cellar. This is the real reason for the numerous delistings,“ says the co-head of Noerr's capital markets practice group.

The problem does not only affect the German market. „The capital market in Germany and Europe is drying up,“ summarises Schulze De la Cruz and points to Sweden, which was long regarded as a shining example of a functioning capital market and is now also confronted with the problem. „This is due to its size,“ says Schulze De la Cruz and concludes: ’To change this, we need the Capital Markets Union.’

The increasing withdrawal sof companies from the stock market should not only alarm advisors, banks and stock exchanges, but also politicians. The stock exchange is no longer fulfilling its economic function of bringing companies and investors together for investment purposes. This is devastating, especially given the billions of euros to be invested in infrastructure and the energy transition.

Bad experiences that shareholders have had are also likely to have damaged confidence in equity investments. The case of Rocket Internet is a glaring negative example. There, the Samwer brothers, as major shareholders, had short changed the other shareholders of their shares with a delisting purchase offer that only corresponded to the minimum price and was far removed from the intrinsic value of the share. The Metro case appears to be similar, although major shareholder Daniel Křetínský offered a premium on the average price. In fact, he is also taking advantage of the low share price to get rid of the free float at little financial cost.

In theory, every shareholder is free to decide whether to submit their shares in a delisting offer. However, anyone who rejects the offer ends up holding an illiquid security. It is not only small shareholders who are confronted with this problem. Many institutional investors have to accept the offer because they are only allowed to hold shares that are listed on a regulated stock exchange. As a company valuation only has to be carried out for a delisting offer in special circumstances, it is hardly surprising that major shareholders now often refrain from concluding a Domination and Profit and Loss Transfer Agreement (DPLTA). This would require an offer based on the company valuation.

Both the major shareholder behind Metro and Adnoc at Covestro have explicitly stated in their offers that they will not conclude a domination agreement. Such announcements aim to remove any speculation from the outset that the offer will be improved.

Another problem is linked to the growing number of ETFs: Passive funds exacerbate the liquidity problem on the stock markets because they can only react, says Schulze De la Cruz. At the same time, the low liquidity also means that the stock market has become considerably less attractive as an exit route for private equity investors, which sell blocks of shares in phases.

Douglas is a prime example in this respect. Since the IPO in March 2024, the share price has fallen by more than 60%, preventing the major shareholder CVC from selling off further. As the investors will have to withdraw sooner or later, the only alternative is to delist and attempt a trade sale.

There is no shortage of examples of this approach, just think of Vantage Towers or Deutsche Familienversicherung.