Medium-sized firms flee stock market

Some firms see more cons than pros in being listed on stock exchanges Keystone

Many middle-sized Swiss firms are leaving the stock exchange, amid the downturn and the pressure to maintain shareholder value.

This content was published on April 22, 2003

The latest well-known company to join their ranks is the food manufacturer Hero.

For some companies, being listed on the stock market has more cons than pros.

"I prefer to turn my back on the stock market," said Nick Hayek Jr, the CEO of the Swatch group, recently in the Tages-Anzeiger newspaper.

"Take the example of Rolex. No one asks whether turnover is up or down two per cent and all your energies can be channelled into promoting the company and working in peace."

For a number of Swiss companies, Hayek's remarks are already a reality. In any event, the number of companies, which have either withdrawn from the market after the end of the stock market boom - or have at least thought about it - has increased.

Zellweger Luwa

Among them is the technology group Zellweger Luwa. Because of financial difficulties, the Zurich-based firm decided to sell its textile machinery branch in December 2002 to concentrate on manufacturing air-conditioning units and gas-alarm systems.

At the same time, Zellweger Luwa decided to withdraw from the stock exchange. By the time the share buyback offer was over in March, most of the company's shares belonged to one concern: Hesta, with 98.7 per cent.

Something similar happened to the Geneva-based asset manager, Unigestion, which manages more than SFr4.5 billion ($3.2 billion).

After returning to the black in 2002 with a net profit of SFr2.1 million (against a loss of SFr2.5 million the previous year), the company announced its intention to leave the stock exchange in March 2003.

Unigestion already holds 71 per cent of its own shares.


The construction machinery manufacturer, Hilti, based in Liechtenstein also decided to leave the Swiss Exchange in February this year.

At the same time, the firm announced that it was concentrating on industrial manufacturing and would give up its finance activities.

It successfully left the stock exchange on April 2.

The majority shareholder of Hero, which is based in Lenzburg, is FIM, which belongs to the German group Schwartau. FIM launched its share buyback offer in March.

But the departure from the stock market could go less smoothly than planned. The offer of SFr165 per share is considered too low by many smaller shareholders. Thus the goal to retain more than 95 per cent of shares - which is a condition of leaving the stock market - might not be achieved.

Ems Chemie

Also making the rounds is the rumour that Ems Chemie - which is owned by Christoph Blocher, the Swiss People's Party parliamentarian - might also quit the stock market.

In summer 2002, some analysts believed that after a share issue, 35 per cent of the freed-up share capital would be bought back.

The Zurich Cantonal Bank, which handled the financing, nevertheless ruled out that Ems Chemie would use the capital to withdraw from the stock market.

Why has the stock exchange lost its appeal in the eyes of these companies, especially after the stock market euphoria during the 1990s?

As long as the stock markets grew, being listed offered a good opportunity to raise capital without bank loans. Also a listing led to companies being taken more seriously.

This is no longer the case today.

"Added to that, the behaviour of investors has changed drastically in the last ten years," said Rodolfo Pusterla, an analyst at Banca del Gottardo.

"Firms should try to grow by financing themselves and not by raising capital."

Lower trade volumes

Pusterla thinks that medium-sized enterprises are usually ignored by investors.

"Such titles don't have liquidity and this scares off institutional investors."

Commenting on Hero's situation, analyst Mario Montagnani of the private bank, Pictet, said that "few analysts worry about this firm and the volume of its shares traded daily is limited".

There are other advantages to not being on the stock market. One example is that there are fewer demands made on the firm's administration.

"A firm that is not listed on the market can be less transparent, which can bring competitive edge," said Pusterla.

It must also be remembered that the stock market does not reflect the Swiss economy. Of the 170,000 registered companies, only 300 are listed on Virt-X and SWX Swiss Exchange.

swissinfo, Andrea Tognina (translation: Faryal Mirza)

In brief

After the stock market boom of the 1990s, some medium-sized Swiss firms seem to be less interested in being listed.

A number of companies, such as Zellweger Luwa and Hero, have decided to withdraw from the stock market.

According to financial analysts, reasons for doing so include the economic downturn.

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