Europe's Hidden Stock Exchange Exodus: 1,600 Companies Vanish in Ten Years - CVC Eyes Delisting of Compugroup
Financier CVC joins the mass unlisting trend by investing in Compugroup's delisting
Europe's stock exchanges have been losing more than 1,600 listed companies over the past decade. Shockingly, this figure outnumbers the number of European companies that have moved to US stock exchanges by a whopping twelve times, with the total worth of these acquisitions being four times higher. James Thornhill, a financial analyst at the UK think tank New Financial, warns of the hidden elephant in the room: "The real problem is much closer to home."
In the latest development, Compugroup, a Koblenz-based medical software company, is eyeing a possible withdrawal from the stock exchange, with CVC and the Gotthardt family leading the charge.
The Unseen Wave of Delistings
Thornhill's statement underscores the concerning surge in delistings across Europe. These delistings are primarily due to companies being taken over by private equity groups, with one out of every six companies vanishing from the stock exchange in the last ten years.
Behind the Delistings: A Multi-Faceted Problem
The delistings can be attributed to a constellation of factors, such as:
- Strict Regulations and Compliance Costs: Europe's stricter regulations and increased compliance costs have impacted operational costs and created complexity for companies listed on European exchanges.
- Market Volatility and Competition: Economic instability and competition from alternative platforms have posed a significant challenge to European companies, particularly in sectors with thinner liquidity and niches.
- Economic Downturns and Brexit Impact: Periods of economic contraction and uncertainties introduced by the UK's departure from the European Union have pushed companies to seek safer, more favorable alternatives.
The Allure of US Exchanges: Regulatory Clarity, Market Size, and Global Visibility
While European companies have opted for delistings to escape regulatory and market challenges, others have sought better opportunities by moving to US stock exchanges. These moves are driven by:
- Deep Liquidity and a Broader Investor Base: US stock exchanges offer a larger investor pool, improved stock performance, and a broader access to capital.
- Regulatory Clarity and Support: The US regulatory environment is often considered more conducive for growth, with clearer rules and less stringent requirements compared to some European jurisdictions.
- Global Visibility and Reputation Enhancement: Listing on a US exchange can boost a company's reputation and open new business opportunities.
The Impact on European Markets and Future Trends
The loss of 1,600 European companies from the stock exchange over ten years has implications for trading volumes, liquidity, and challenges for remaining companies. As the trend of delistings and migrations continues, European markets may face further challenges in the years to come.
In summary, the trend of delistings versus migration underscores the intricate web of factors influencing European companies' strategic decisions, with the underlying regulatory, economic, and market challenges playing a significant role in shaping this evolving landscape.
The unsettling surge in delistings among European companies, as highlighted by James Thornhill, is primarily due to private equity groups taking over companies, with one out of every six companies disappearing from the stock exchange in the last ten years. On the contrary, some European companies have chosen to move to US stock exchanges, attracted by deep liquidity, regulatory clarity, and global visibility.
