Thyssenkrupp’s DAX Membership Is Built on Sand Rather Than Steel
(Bloomberg) -- Thyssenkrupp AG looks set to go the way of Commerzbank AG last year -- out of Germany's main equity benchmark.
The industrial conglomerate, which has a sprawling business ranging from producing steel to machinery and elevators, has halved its market value during the past twelve months as it was battered by an ailing auto industry, falling steel prices and higher labor costs. That may cost the company its place in the DAX Index when constituent changes are announced next month.
While it “isn't completely impossible” that Thyssenkrupp will regain the status required to fulfill index membership criteria by the end of the month, “a gap of 13% in market value makes it not very likely,” LBBW Index analyst Uwe Streich said in a note to clients.
A spokesman for Deutsche Boerse AG declined to comment and a spokesperson for Thyssenkrupp wasn't immediately available for comment.
The exit would mark the end of a 31-year membership for Thyssenkrupp and its predecessors that is as old as the index itself. Real estate company Deutsche Wohnen SE and aircraft engine maker MTU Aero Engines AG are currently head-to-head in the race to replace it in the benchmark.
The changes may cause some short-term share price fluctuations as passive investors in particular are forced to realign portfolios to the new constituents. Exchange-traded funds with assets of more than 14 billion euros ($15.7 billion) track the DAX, data compiled by Bloomberg show.
In the meantime, Thyssenkrupp chief executive officer Guido Kerkhoff is looking to list an IPO of the company's elevator unit to generate cash needed to cover billions of euros in unfunded pension liabilities and fix its steel, plant construction and auto supply operations. The steelmaker is scheduled to report earnings Thursday for the October through June period.
Index provider Deutsche Boerse will announce its decision on Sept. 4 with the changes becoming effective on Sept. 23.
To contact the reporters on this story: Jan-Patrick Barnert in Frankfurt at jbarnert3@bloomberg.net;William Wilkes in Frankfurt at wwilkes1@bloomberg.net
To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net, Namitha Jagadeesh, John Viljoen
©2019 Bloomberg L.P.
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