5 years ago, I worked in Strategic Risk Management team of a large universal bank preparing reports and presentations about strategic threats to the banking sector in Europe.
Robo-advisory, fintech, machine learning were the terms already broadly known. FinTechs were not considered to be monsters from science fiction anymore. Nevertheless, nobody saw the disruption coming that fast.
Last week’s news opened eyes even of the most sceptical of us.
Creditshelf announced its IPO plans for Q3 2018. Wirecard replacing Commerzbank in DAX would become a metaphor for the disruption already taken place in Germany.
Creditshelf offers credit products for SMEs in Germany making credit decisions quickly and efficiently based on the new technology large banks try to copy now. The company was founded in 2014 by young ex-bankers and old friends who knew exactly how to design lending from scratch. The firm says it had more than 1,100 loan applications, carrying a volume of around €900m, as of 31 March 2018. In that same period it has lent €58m, with an average interest rate of approximately 9 per cent and an average term of 17 months. Creditshelf now plans to raise 15-20m EUR new capital. New shares will be traded at Frankfurt Stock Exchange. Commerzbank is the bookrunner.
Let’s move to Commerzbank. Or better to say – to Wirecard replacing the second largest German bank in DAX.
Wirecard equity is a unicorn loved by the majority of portfolio managers. The company started in 1999 and was traded in TecDAX since 2006. There is a big chance that it is going to come to DAX in the nearest future. Wirecard AG offers payment services and payment IT infrastructure to many financial companies around the globe. N26, another recent fintech giant is a strategic partner.
The Wirecard case motivated me to look up rules for DAX composition and replacement policy.
Here are the findings:
There are four rules for adjusting the composition of the DAX index:
- Fast exit (45/45): A company must exit the DAX if it is no longer one of the 45 largest companies according to one of the two criteria – stock market turnover or market capitalization
- Fast Entry (25/25): A company is included in the DAX if it is one of the 25 largest companies according to both criteria (stock market turnover / market capitalization).
- Regular exit (40/40) A company must leave the DAX if it is no longer one of the 40 largest according to one of the two criteria (stock market turnover / market capitalization), but an aspirant achieves at least 35th place in both criteria.
- Regular Entry (30/30) A company may now enter the DAX if it is one of the 30 largest companies according to both criteria (stock market turnover / market capitalization)
For the regular adjustment date in September, all four rules will be applied.
By contrast, the fast-exit and fast-entry rules are also applied in March, June and December (these are extraordinary adjustment dates).
Apparently, Wirecard now fulfils the criteria for the Fast Entry, according to LBBW and Godmod Trader.
More fintech news are coming, stay tuned!