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Navigating IPO Communications with Cornerstone Investments

Geopolitical tensions, conflict, recession, and high interest rates – not many companies in Germany are currently venturing onto the trading floor. After the promising stock market debuts of Porsche, IONOS, thyssenkrupp nucera and, most recently, SCHOTT Pharma in the past 18 months, the IPO market in Germany has cooled off.

In a volatile capital market environment, it is increasingly important for companies to convincingly communicate the long-term viability of their business model as well as the security and predictability of the transaction. Only those who succeed in underpinning these aspects with compelling arguments will be able to attract investors in a volatile market environment.

In the IPO process, a cornerstone investment can provide additional confidence in the issuer. According to a recent analysis by FGS Global, 60 percent of the companies that have gone public in Germany in recent years have had at least one cornerstone investor on board.

What are cornerstone investors?

Cornerstone investors are large investors who agree to purchase shares in a company before its listing. Unlike anchor investors, they typically buy smaller stakes of up to 10 percent. Moreover, their participation must be officially disclosed in the prospectus at the latest.

How do cornerstone investments influence share price performance?

FGS Global's analysis of recent IPOs in Germany indicates a rise in cornerstone investments in the German market, particularly since 2021. It also shows that a cornerstone investment can contribute to a more stable share price for newly listed companies. However, a tailored communication approach is needed for IPO candidates that have a cornerstone investor on board. 

How to deal with cornerstone investments in IPO communications?

When effectively communicated, cornerstone investments can enhance security and stability during an IPO, especially in a volatile market environment, while concurrently strengthening the issuer's market credibility.

The following checklist is designed to help you prepare your communications around cornerstone investments throughout the IPO process:

  • Analyze perception: Assess the reputation of the potential cornerstone investor at an early stage, especially in the issuer's home market.

  • Showcase track record: Prepare information on the cornerstone investor's successful investments and transactions in the market.

  • Develop comprehensive key messages: Link the perception and track record of the cornerstone investor to the IPO story and provide concrete examples of how the cornerstone investor can bring expertise to the company.

  • Explain role: Clarify the role of the cornerstone investor to relevant stakeholders and the advantages for both the transaction and the company.