BERLIN — Internet stocks may be hot in the U.S., but in Europe, newly listed media companies are all the rage.
In Germany, in particular, investors have created a furor with their seemingly unquenchable thirst for shares in hitherto little-known entertainment companies.
The country’s best performing stock for the past two years has been the kidvid producer/distribber EM.TV. The Munich-based company has seen prices increase more than 16,000% since its launch on Germany’s New Market, which opened shop in October 1997.
“The trend for media companies to float is the German equivalent to the run to the stock exchange from Internet companies in the U.S.,” notes Jeffrey Colvin, senior VP from L.A.-based Imperial Entertainment.
The secret ingredient in the whole equation is the New Market itself, which like the Nasdaq in the U.S., has enabled smaller companies to go public.
It has since become so popular that top performers, including EM.TV, are now tipped for a move to the parent exchange, the DAX, to make room for newcomers.
With no end to the trend in sight, a number of other media companies are poised to float.
Among them are Wim Wenders and Uli Felsberg’s production company Road Movies, which is forming an alliance with leading post production house Das Werk. It will float late this month.
Aiming to go early in September is leading production and distribution house Bernd Eichinger’s Constantin Film, 50% owned by the Kirch Group — which itself is planning a partial listing.
Distrib Splendid Film later this year will join a number of rivals trading daily on the Frankfurt floor, including Advanced Medien, Senator Film and Highlight.
Likewise, EM.TV’s revenues have gone from $14 million in 1997 to a projected $172 million this year. The share price has multiplied 150 times over.
“Going public has not only provided us with the financial means to take on larger projects,” says EM.TV chairman Thomas Haffa, “but it has given us the credibility and visibility toward international companies and partners. Today, we are in a position to realize projects and ideas, nationally as well as internationally.”
For many companies, stock coin has attracted new friends Stateside.
“News travels fast,” notes Rainer Koelmel, co-topper at Kinowelt. “The L.A. community learns fast, and that was the buzz at Cannes Film Fest this year — that the Germans are in the money.”
Take licensing outfit Intertainment, which went public in February.
Intertainment has struck via its new partner Franchise a first-look, pan-European distribution deal with Warners in Europe on the back of which its stock price soared.
Kinowelt is setting up a joint production office with Alliance Atlantis in L.A. earmarking joint investments of $150 million over three years.
Splendid, meanwhile, has acquired a significant stake in U.S. indie Initial, while Advanced has put up $150 million over five years to co-finance 12 Chuck Gordon productions.
The down side is that the companies are now under increased pressure to perform in order to keep share prices high. This has led to overpaying and scrambling for deals, which has resulted in asking prices rising.
“There is the same amount of competition out there, it’s the same players as before, but there is just more coin to play with,” notes Advanced Film’s member of the board Hanns-Arndt Jovvy.
The scrambling has also led to some incredulous deals. One player reportedly went so far as to turn up at Miramax’s office in Cannes offering $20 million for any three films.
“If we aren’t careful a few people are going to ruin the market for everyone by announcing deals and consequent projections that just aren’t credible,” Koelmel notes.
So far it has been the smaller companies that have taken the plunge, but Germany’s media heavyweights are also edging toward the stock exchange.
Kirch will float about 20%-25% of core subsid Kirch Media over the next two years and is open to eventually floating its entire pay TV operation.
Bertelsmann, on the other hand, is adamant that while it will continue to float smaller subsidiaries, even if it were not bound by an agreement with the founding family that prevents it from floating core businesses, it wouldn’t be tempted to go further.
“It’s just not what anyone here wants,” says a rep.