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Blog Posts — August 20, 2020

Delivery Hero to Replace Wirecard in DAX

Delivery Hero SE, the food-delivery company whose shares have more than trebled in the past three years, will join Germany’s blue-chip DAX® on Aug. 24. The stock will replace Wirecard AG, the processor of electronic payments that filed for insolvency in June.

The changes were announced after markets closed on Aug. 19 by Qontigo’s index provider STOXX, administrator of the DAX indices, and follow a review of existing governing rules for German selection indices.

The index methodology was amended on Aug. 12 to change the treatment of companies that enter insolvency proceedings, an event that now leads to the immediate removal from DAX indices before regular reviews.1 The change was widely supported in a market consultation.

Market cap plunges

Wirecard, based just outside Munich, collapsed in days after admitting in June that 2 billion dollars of its reported balance-sheet capital were likely inexistent. German regulators and prosecutors are investigating whether the company used fictitious revenue to inflate its sales.2 Wirecard’s market capitalization has plunged to 163 million euros from 13 billion euros in mid-June.

Size and liquidity

DAX tracks the 30 largest stocks trading on the Frankfurt Stock Exchange, and selection of companies is based on the quantitative criteria of free-float market capitalization and order-book volume. A scheduled quarterly review screens for significant changes in these criteria. If a constituent’s position in either size or liquidity deteriorates significantly relative to the other constituents, it is replaced by the highest-ranked non-DAX company that has achieved a rank of at least 35 in both parameters. 

Nine-year old company

Delivery Hero was founded in 2011 and is headquartered in Berlin. In spite of its German heritage, the company doesn’t count its home market among the 43 countries it operates in. The shares have risen 39% so far in 2020,3 helped in part by global lockdowns that have fueled more on-line ordering. 

AIXTRON SE, a manufacturer of components for the semiconductor industry, will take Delivery Hero’s slot in the MDAX®, the index for mid-sized companies, STOXX said. Retailer HORNBACH Baumarkt-AG will join the SDAX®, the gauge for smaller companies. 

All changes will become effective on Aug. 24. The next regular review of the DAX index is set for Sep. 3. 

More than 150,000 financial products, ranging from exchange-traded funds (ETFs) to structured products, are based on the DAX.

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1 Under the new methodology, an ‘insolvency proceeding’ shall refer to any applicable insolvency, bankruptcy, dissolution, liquidation or winding up proceedings or similar proceedings in relation to the assets of an index constituent. An ‘insolvency event’ in relation to a constituent shall be deemed to have occurred if STOXX has been informed by the constituent, or a national competent authority, or a court in writing or through public announcement (other than by entry into a register) that (i) insolvency proceedings over the assets of the constituent will be filed or have been filed for, or (ii) that insolvency proceedings have been opened in relation to the constituent, or (iii) the constituent seeks or becomes subject to the appointment of an administrator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets, or (iv) the insolvency proceedings are rejected due to a lack of assets, or (v) constituent is in liquidation, be it as a result of Insolvency Proceedings or a shareholders’ decision or otherwise.
2 Wall Street Journal, ‘How Wirecard Went From Tech Star to Bankrupt,’ Jul. 2, 2020.
3 Price return through Jul. 31.