Dutch stock exchange used less to raise capital

10/01/2008 15:00

Since 2000 the Dutch stock exchange has been less popular as a source of capital. Many companies have left the market, there have been fewer share issues and companies have been buying back more shares. 

Fewer companies quoted

The number of companies quoted on the Dutch stock exchange is falling rapidly. In December 2007 127 companies were quoted, while at the start of 2000 this was 170. Overall, therefore, one quarter of companies have left the stock market because of bankruptcy, takeovers or mergers. Well-known names among them are: KLM, Corus and, recently, Numico.

Number of companies on Dutch stock exchange

Number of companies on Dutch stock exchange

Market value recovering slowly

The total stock market value is mainly affected by fluctuating share prices and companies entering and leaving the market. The drop in share prices at the end of the dotcom hype accounted for most of the change in market value between 2000 and 2007.

In addition companies worth more than 52 billion euro left  the stock exchange, while new companies representing 25 billion euro entered the market. World Online, which was bought up for 3.5 billion euro within a year, accounted for half of new shares in this period. In 2008 more than 77 billion euro in shares will be taken off the market as companies bought up in 2007 such as ABN AMRO and Stork, are removed from the list.

Value of Dutch shares on the Dutch stock exchange

Value of Dutch shares on the Dutch stock exchange

Fewer share issues

As companies quoted on the stock exchange have more than enough fluid assets, they have been issueing fewer new shares to raise capital in recent years. One exception was Fortis, which issued shares worth 13.4 billion euro to finance its bid for ABN AMRO.

Another reason for the meagre interest in new share issues was the low interest rate, which made borrowing money more lucrative. Also, private equity houses have been emerging as an alternative source of capital.

Share issues on the Dutch stock exchange

Share issues on the Dutch stock exchange

Companies buying up withdrawing more own shares

As companies have been buying back and withdrawing their own shares, it is becoming clear that they no longer need the stock market and are thus aiming to build up shareholder capital. With the aid of extensive programmes, companies have bought up more than 31 billion euro of their own stock since 2003, of which more than 15 billion euro in 2007. From January 2008 buying back own shares will be free of tax and therefore even more attractive.

Maarten Molders