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Deutsche Börse IPO Indicator Shows Increase in Issuing Activity


More IPOs expected

Deutsche Börse published the IPO indicator for the 3rd quarter of 2010 on Tuesday. Volatility, which has been going back down for a few weeks, in connection with rising share prices and the improved IPO climate expected by market participants all point to an increase in IPOs over the next few months. All in all, the environment for IPOs appears to be steadily improving. The uncertainties on the markets for European government bonds triggered not least by crisis seem to have abated.

The IPO indicator, which is published each quarter, is an important measuring instrument for companies seeking capital that aim to go public and that are looking for the right moment to enter the capital market. The indicator is compiled from surveys of market participants and calculations by the Technical University in Munich using Deutsche Börse trading data.

“If you take a closer look at the results of the survey, the fact that issuer sentiment has improved much more than that of other market participants particularly stands out. This development is primarily due to the upward movement in the valuation level. That, in conjunction with falling volatility could form a good basis for increasing issuance momentum,” said Professor Christoph Kaserer from the Technical University in Munich.

Background on IPO indicator
Deutsche Börse developed the Deutsche Börse IPO Sentiment Indicator together with Professor Christoph Kaserer from the Center for Entrepreneurial and Financial Studies (CEFS) at the Technical University in Munich as a mood barometer for the primary market. The indicator is based on conclusions drawn from empirical capital market research. It combines that with past experience using behavioral finance theory. It is calculated at the end of every quarter, and since the beginning of this year has comprised four components: under-pricing sentiment (realized difference between the issuing price and the first listing price), DAX share price performance, volatility and IPO climate. This has enabled forecast quality to be further improved. The indicator was calculated for the first time in March 2005.

Results of the survey of active market participants
The IPO climate is determined from a survey of a panel of consortium banks, active investors and issuers. Each participant is asked five questions.
The first two deal with the IPO market’s attractiveness. They are related and thus counted together. The idea behind this is that an evaluation of the market’s attractiveness should be harmonized with the participants’ actual actions. The greater the contextual consistency of the two answers, the more reliable the rating of the answers. Questions three and four inquire about estimates of the current and future equity market valuation. The answer to the last question gives an estimate of future IPO activity on the primary market. The answers are given using a scale from 1 to 5, which results in a total value for the IPO climate of between 3 and 60. The IPO climate is currently at 33.48 points, thus virtually unchanged from the previous quarter’s 33.42. The climate was at its lowest point in Q4 2008 at 27.18 points. It has risen steadily since then.

Please find historical values of the IPO climate attached.

The complete analysis can be found on the internet at


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