German Retail Investors Seek
to Join IPO Party --- Oversubscriptions Spur Complaints Of How Shares Are
By Rhea Wessel
Dow Jones Newswires
The Wall Street Journal Europe
(Copyright (c) 2000, Dow Jones
& Company, Inc.)
FRANKFURT -- Walter Scheusle had been investing in the German
stock market only for six months when he decided to try his hand at an initial
After seeing dozens of advertisements and hearing
colleagues talk up the stock, Mr. Scheusle picked Infineon Technologies AG, the
Siemens AG semiconductor spinoff that listed March 13.
tool salesman put in orders at the four banks where he has accounts, but to no
avail. The IPO was 33 times oversubscribed. About one in six small investors
got their hands on the hot stock.
"Of 30 to 35 people I know who tried
to buy, only one got shares. It's hard to believe that one in six got them,"
said Mr. Scheusle, a native of Weinheim, a small town near Heidelberg. "Big
money stays in big hands," he added. He had planned to sell half of the 400
shares he ordered, putting the rest away for retirement.
isn't alone in his disappointment, and small investors across Germany are
beginning to wonder if they'll ever get a decent slice of the IPO pie.
Deutsche Telekom AG's T-Online will be the next big one served up, and
angst about fair distribution is already setting in. The Hamburg state court
confirmed Friday that it has issued a temporary injunction that keeps Deutsche
Telekom from giving preference in the IPO to online subscribers. An
advertising-watchdog group filed the petition.
A federal oversight
agency, Bundesaufsichtsamt fuer den Wertpapierhan del, said last week that the
Infineon IPO triggered a record number of complaints -- it had logged more than
100 by that point. It's considering whether the complaints from empty-handed
investors warrant an investigation of the banks involved.
mass-circulation daily newspaper Bild Zeitung ran a front-page report on the
IPO craze last Monday. "An IPO has given all of Germany stock fever," the story
said. "And those with good contacts got more shares!" A shareholder-protection
group, the Schutzgemeinschaft der Kleinaktionaere e.V., said that Infineon knew
that demand was high after the first week of subscription and that they should
have made a public announcement.
Infineon used a lottery-like
share-distribution system, and said that its choice was fair. Retail investors
received 40% of the 174 million shares offered while institutions took 60%. A
spokesman for an association representing more than 300 private banks in
Germany also said the process was transparent.
Facing the same problem
of heavy investor demand in the U.K., dot.com companies there are adopting a
different strategy. They award more investors fewer shares, but that still
leaves some investors angered. Retail investors received just 35 shares each in
the recent IPO for Lastminute.com PLC, arguably the most hyped and eagerly
awaited Internet float in the U.K. But in Germany, all eyes are now on
The company will float 100 million shares in mid-April, an
offering expected to dwarf all European dot.com IPOs. Analysts value the
company at up to 30 billion euros.
Dozens of banks are involved in a
consortium led by Commerzbank, Dresdner Bank and Goldman Sachs. Book building
will run from April 3 to April 12, and shares will first trade on the Frankfurt
exchange April 17.
Deutsche Telekom said last week that it has decided
how it will distribute shares of T-Online and will announce the process in the
next few weeks.
"We will use a transparent and fair process of
distributing the shares," a spokesman said.
On Friday, the day the
injunction was made known in the press, Deutsche Telekom said that it was
looking into the matter.
Prior to the injunction, it had told T-Online's
4.2 million subscribers that they had a better-than-average chance of receiving
shares -- provided they completed and returned a satisfaction questionnaire by
Even though demand is expected to far outstrip supply,
Deutsche Telekom isn't holding back the marketing for the T-Online IPO. An
advertising campaign has begun, featuring Robert T-Online, a hip youngster who
raps about T-Online shares. He beckons investors on television, radio and
online to enter the world of Internet-stock fever.
But Mr. Scheusle
doesn't need any enticements. Even with the Infineon disappointment, he's sold
on the idea of IPOs and plans to throw his hat in the ring for T-Online.
If he is passed over again and again, he says he'll consider a
complaint. But for now, he's more interested in learning how to manage his
portfolio -- on the Internet.