Fund Manager Announces: "Numerous Funds to Liquidate Linde Holdings"
In a significant move, Linde - the most valuable DAX company - has announced its decision to leave the Frankfurt Stock Exchange and list exclusively on the Wall Street. This shift raises questions about the potential impact on Linde's share price and its shareholders.
When a company delists from a major European exchange like Frankfurt and shifts its primary listing to a US exchange, it often results in reduced liquidity and accessibility for European investors. This can lead to increased volatility and potentially lower share prices in the European market due to reduced trading volumes and investor reach.
Moreover, the DAX index has a ten percent limit on the weighting per company, designed to prevent a single stock from dominating the index. If Linde is delisted from the Frankfurt Stock Exchange and removed from the DAX, it will no longer be subject to this limit, but it will also lose the benefits of index funds and institutional mandates tied to DAX inclusion. This could potentially decrease demand and exert downward pressure on the share price in Germany.
The implications for shareholders are also significant. European shareholders could face higher transaction costs and currency risks due to trading on the US market. Some institutional investors restricted to European exchanges might have to divest, increasing selling pressure. However, Linde’s delisting from Frankfurt and exclusive listing on the Wall Street could also aim to streamline regulatory burdens and target US investors, which could have a positive effect on share valuation in the US market.
Comparable cases, such as CompuGroup Medical’s strategic delisting and transition to private ownership, have shown that public delisting can be accompanied by public tender offers at a fixed price, often providing shareholders an exit at a premium or fair valuation. For a blue-chip company like Linde, the impact may be more nuanced, balancing investor base changes and index exclusion effects.
In conclusion, Linde’s decision to delist from Frankfurt and list exclusively on the Wall Street is likely to lead to some pressure on its share price in the German market due to reduced liquidity and DAX exclusion, impacting shareholders who trade there. At the same time, it may align the company better with American investors and regulatory frameworks, which could be beneficial on the Wall Street side. The overall effect will depend on market perception, investor base shifts, and strategic company communications.
It is estimated that the short-term impact on Linde's share price, due to its delisting, is disadvantageous but manageable with a buyback program. Union Investment, like its competitors, will reduce its holdings in its Eurozone and Germany funds. However, the delisting decision benefits shareholders and shareholder value by eliminating the selling pressure caused by the ten percent limit. In the short term, Linde may increase its buyback program to manage the negative price impact of delisting. The share price of Linde should recover quickly after the short-term impact. It's important to note that Linde's decision to delist is not directly linked to Union Investment's reduction of holdings in its Eurozone and Germany funds.
Arne Rautenberg, a fund manager at Union Investment, has estimated that the short-term impact on the share price of Linde, due to its delisting, is disadvantageous. He also emphasised that Linde's decision is not a criticism of the company but rather a reflection of other German corporations' inability to keep up with their American counterparts. Approximately ten percent of shareholders are estimated to have to sell their shares after the delisting of Linde, due to their funds' inability to hold the largest DAX stock.
Linde is already included in the US index S&P 500, where there is no cap on individual stock weighting. The ten percent limit in the DAX index caps the index weight of each individual DAX stock. The delisting of Linde is not directly linked to Union Investment's reduction of holdings in its Eurozone and Germany funds.
References: [1] CompuGroup Medical AG (2020). Annual Report 2020. Retrieved from https://www.compugroup-medical.com/en/investor-relations/reports-and-publications/annual-reports [4] Linde AG (2021). Annual Report 2021. Retrieved from https://www.linde.com/en/investor-relations/reports-and-presentations/annual-report-2021.html
As a result of the delisting from the Frankfurt Stock Exchange, European investors may face reduced liquidity and accessibility to Linde, leading to potential increases in volatility and lower share prices. This decision by Linde to list exclusively on the Wall Street could also prompt institutional investors restricted to European exchanges to divest, potentially causing further downward pressure on the share price in Germany.
Linde's move to focus on the US market could aim to streamline regulatory burdens and target American investors, which could have a positive effect on share valuation in the US market. This shift in business strategy might necessitate a reevaluation of investing strategies for those with interests in finance and business.
