02 Sep 2022

IPO newcomers create double-digit growth in turnover and workforce

Stock exchange companies create numerous, new jobs in the year of the IPO. In total, the 14 German companies that have taken the step of going public in 2021, hired around 8,500 new employees, with acquisitions contributing to this high figure. On average, the number of employees increased by 19.0% in fiscal year 2021. But the share prices of the newcomers have fallen sharply. Permanent, continuous and credible communication with the capital market and its players is therefore more important than ever. These are the findings of a study conducted by the Munich-based communications agency relatio PR, which analyzed IPOs in Germany in 2021.
The stock market is an ideal instrument for financing growth and employment. By going public, companies can raise funds, further their own development and create jobs. A U.S. study concluded more than ten years ago that around 90 percent of jobs in companies are created after the IPO. This illustrates the positive economic significance of IPOs, especially since they also generate high tax revenues.
The study shows that the young IPO companies create jobs, but they also need employees. Even a year before IPO, the 14 companies’ headcount increased by an average of 16.8%. 12 companies saw an increase in employees in the IPO year, and only two companies saw a decrease.

Double-digit revenues growth in 2021 and 2020 as well 
The companies are also experiencing double-digit growth in revenues. In the IPO year, revenue growth averages 24.5%. 13 companies were able to increase revenues, and only one company recorded a drop in sales. And in 2020, the IPO companies also recorded high growth. Revenues increased by 26.0% compared to 2019. The majority of the companies achieved earnings before interest and taxes (EBIT). In total, nine IPOs had positive EBIT and five had negative EBIT in 2021, ranging from plus €914.5 million to minus €200.9 million.

Negative headlines due to  share price development 
A successful IPO leads to an increase in the level of awareness as well as the reputation of a company. However, the IPOs of 2021 made numerous negative headlines due to the share price development, as investors sometimes have to cope with high price losses compared to the issue price.
In the first half of 2022, the stock markets recorded a significant decline. The share price performance of the 14 stock market newcomers has so far been disappointing from an investor’s point of view. On average, the share price loss at June 30, 2022, compared with the issue price is minus 50.8%. 13 shares show a negative price development, only one share is up.

Importance of investor relations 
With the stock exchange listing, companies have new stakeholders such as investors, analysts and the financial media. But business partners and competitors now also have direct access to financial data and follow the company’s development closely. The share price becomes the visible indicator of management success, but this is partly determined by the general capital market environment. I
In such difficult times, when share prices fall significantly, investors want to know exactly who they are entrusting their money to. Permanent, continuous and credible communication with the capital market and its players is therefore more important than ever.
Capital market participants are among the most critical stakeholders of the company. This is what makes investor relations so important. Numerous studies prove the value contribution of good financial communications. An important goal is to gain and maintain the trust of investors in the long term. This is especially important for newcomers to the capital market. Trust and credibility still have to be built up.

The entire IPO study including graphics can be found on the Geman language blog www.geschaeftsberichte.de

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