Accounting & Tax

Porsche Faces Delisting from Index As Deutsche Boerse Readies Decision

The sports-car maker loses its position on the midsize-company exchange because of its refusal to issue quarterly earnings reports.
CFO.com StaffAugust 7, 2001

Porsche AG is making one last stand for Germany’s old equity culture.

The sports-car maker is expected Tuesday night to lose its position in Germany’s main index for midsize companies as a result of its refusal to issue quarterly earnings reports, reports the Wall Street Journal.

Since January, Deutsche Boerse AG, the operator of the Frankfurt stock exchange, has required all companies listed in its MDAX index to provide quarterly reports. Porsche has refused, arguing that quarterly reports would, among other things, reflect badly on its highly cyclical business during slow quarters, says the Journal.

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Porsche reports only six-month and full-year results. Deutsche Boerse officials say they know of no other listed company that declines to report on a quarterly basis.

Investors came down in favor of more frequent reporting, according to Journal.

The move is in many ways the last gasp of Germany’s old equity culture of semiannual, and often opaque, earnings statements aimed at a small group of shareholders, says the Journal. Porsche’s shares trade at around 400 euros ($353) and shareholders don’t have the right to vote on company decisions. In April, Porsche shares underwent a 10- for-1 split, meaning that they previously traded at around 4,000 euros, a price that discourages all but the wealthiest retail shareholders.

Porsche and Deutsche Boerse have held talks sporadically since January, but haven’t found common ground, reports the Journal. Deutsche Boerse is supposed to decide on the car maker’s future in the MDAX index Tuesday night at a meeting of the exchange’s index committee.

A company spokesman tells the Journal that Porsche’s position on the matter hasn’t changed. He argues the Deutsche Boerse places more value on formal rules than on quality of reporting.

Analysts are puzzled by the company’s decision, considering that Porsche’s performance has been solid, says Journal. Still, they agree that the company has proved a good long-term investment.

In a strange twist, Frankfurt airport operator Fraport AG is a likely candidate to replace Porsche in the index after Tuesday night’s meeting, according to the Journal. Fraport also doesn’t issue quarterly reports, although it has vowed to begin doing so in the first quarter of next year.