Thyssenkrupp threatened with exit from dax index

thyssenkrupp threatened with exit from dax index

A racing cyclist sweeps through a hutten plant. Glowing steel sparks in the background. The thyssenkrupp logo can be seen on the bicycle frame. Steel racing bikes are the latest product from the giant empire of the ruhrgebiet corporation.

#unbreakable is a hashtag in the promotional video. But the steel and industrial group with more than 200 years of history currently looks anything but unbreakable. After red figures and repeated strategy changes, thyssenkrupp is threatened with relegation from the dax.

The german stock exchange will announce whether this will happen today after the close of trading. Group CEO guido kerkhoff is also aware that thyssenkrupp, whose predecessor thyssen is among the dax founding members, will probably have to leave the top league of german stocks. "There are more important things right now than mourning the loss of an index," he told the "spiegel" newspaper.

While the steel racing bike is intended to arouse emotions, the dax is all about cold numbers. According to the rules, companies with weak market capitalization or stock market sales can be kicked out of the leading index. With both values it does not look good for the essener for a long time any more.

The group, which has more than 160 subsidiaries worldwide, generates less than 7 billion euros in sales.000 employees on the balance sheet. Thyssenkrupp’s successor in the dax is expected to be engine manufacturer MTU. According to analyst uwe streich of landesbank baden-wurttemberg, it has won the head-to-head race with the real estate company deutsche wohnen.

For thyssenkrupp, the dax exit could mean more than just a loss of image. "The drop from the dax definitely had drastic consequences for thyssenkrupp’s stock," says dirk schiereck, professor of corporate finance at the tu darmstadt. In the meantime, 6 to 7 percent of all dax shares are held in passive funds that track the dax. "This means that 6 to 7 percent of thyssenkrupp’s shares could change hands in the near future."An attack on the essen-based group would then be a lot easier "because more shares are available".

The spectre of a breakup has long been haunting thyssenkrupp. Kerkhoff wants to counter this with the sale of thyssenkrupp’s profitable elevator business, among other things. This should bring money into the coffers, which should also be used to stabilize the steel operations. Contrary to original plans, steel will remain a core business of the ruhr group following the EU competition authorities’ veto of the merger with its indian competitor tata steel.

A sale of the elevator business, which earns more than thyssenkrupp’s other businesses combined, no longer seems out of the question. In any case, kerkhoff is trying to stir up a bidding war between investors and competitors. The train has left the station, he told the public.

Speculation about the sale of the division, which is valued significantly higher than the group as a whole, recently pushed thyssenkrupp’s share price up a little. At times, the share price was again around 11 euros. This was hardly likely to secure the dax position. In the 13 months since kerkhoff took office, the share price has fallen by almost 50 percent.

What exactly kerkhoff intends to do with the proceeds from a stock market flotation or sale has so far been left open by him. According to a "handelsblatt" report, thyssenkrupp is discussing a takeover of the duisburg-based steel trader klockner& co. This could create a dominant materials trader in europe and north america. The group is reluctant to comment.

Buying another rough name from the mining history of the ruhr area was a classic krupp solution to its own problems. With the takeover of the dortmund steel group hoesch and the merger with thyssen in the 1990s, krupp had already used rivals to create a breath of fresh air on its own doorstep.

Thomas hechtfischer of the german association for the protection of securities ownership is not convinced by a possible merger between thyssenkrupp and klockner. "Both are doing badly," said the shareholder representative. The takeover of klockner, which was discussed earlier, would not be a substitute for the tata merger anyway, because it would not help against overcapacities and price pressure for steel.

Dax expert schiereck does not see thyssenkrupp as having much chance of returning to the premier league. "The number of companies that have climbed back up after dropping out of the dax is much smaller than the number of stock corporations that have permanently disappeared from the dax."A place on the mdax for mid-cap stocks does not have to mean only negative things for thyssenkrupp. There, the essen-based company was allowed to become "a very visible and dominant stock". It’s a bit like soccer, he says: "fans there also find it more interesting when their team is in the 2nd division. League at the top, instead of in the 1. League to be left behind."

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