Linde’s withdrawal is a setback for the German financial center

Linde gas cylinders

The leading index Dax loses its most valuable member.

(Photo: Linde AG)

Even before the merger with Praxair, Linde was an international company. More than 90 percent of the employees worked abroad, which is also where the majority of the owners are based.

But in recent years, the group has moved further away from its original home: the formal headquarters in Dublin, the tax base in London, the operational management to a large extent in the USA. Now follows the withdrawal from the Frankfurt Stock Exchange. The critics of the merger, who saw it as a secret takeover by the Americans, feel vindicated

This is initially a major setback for the Frankfurt financial center, as Linde is the most valuable company in the Dax. Germany is one of the lower ranks internationally when it comes to the stock market, also because of its less pronounced share culture. The majority of Linde’s shares have already been traded on Wall Street.

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From the point of view of management and shareholders, the decision is understandable. The industrial logic of the merger worked, as the proponents had predicted, and the price rose sharply. As a result, Linde repeatedly hit the cap of ten percent with which Deutsche Börse limits the index weight of an individual Dax value each time the index is recalculated.

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As long as the share performs better than the Dax, funds that track the leading German index have to keep selling Linde shares.

That pushes the course. Despite many discussions behind the scenes, a new regulation did not come about. The departure of Linde, which since the merger has been even more focused on returns and shareholder value, is the expected consequence. There are no romantics in Danbury, but tough calculators.

SAP sticks to double listing

It is unlikely that Linde will find imitators, at least in the short term. SAP, number 2 behind Linde in terms of stock market value, is also listed in Germany and the USA, but currently has no plans for a withdrawal in this country. Other German corporations such as Siemens had tended to bid farewell to Wall Street in the past decade because expectations of a double listing had not been met.

The cap limit in the Dax makes sense – especially since the legislator currently only allows funds to invest up to ten percent in individual shares anyway. Diversity should be secured, and dependence on individual heavyweights kept within limits. There are already a few clusters in the highest German stock exchange league, from the strong presence of the automotive industry to corporate families like Siemens.

Nevertheless, those involved should continue to look for flexible solutions in order to avoid a second Linde case in the future as far as possible. A first step was the expansion of the Dax to 40 members, which reduces the weight of individual titles. But at Linde, the course went so well that the limits were soon reached again.

More: Insiders made a lot of money from these stocks in 2022.

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