German financial services firm Capital Stage has announced that it will cease its corporate finance and securities-related activities in favour of venture capital investing. Macro Hahn, a member of Capital Stage’s board, said: “In Europe, there is still great demand for risk capital, and this will increase even further when new lending-related capital-adequacy directives come into force in connection with Basel II. The prime aim of Capital Stage in future is therefore to exploit the existing opportunities for growth in the fields of equity investments.” The company will continue to offer consulting services.
Capital Stage’s banking division has made losses in excess of EURO12 million since the start of last year, compared to a small profit in the previous year. The collapse in profits has been attributed to the continuing difficult situation on the capital markets and increasing cost pressures in the sector, such as costly new trading systems and extended trading times. The banking division is expected to make a further negative contribution to 2002 results, with a loss of over EURO1 million in the year’s first quarter. The management board of Capital Stage feels these losses are stunting the growth of its venture investing activities, which are financed from the group’s profits. The company recently announced it was also raising a nanotech-focused fund from third party investors.
Last year the group’s venture capital investments returned an EBIT of EURO5 million. Due to the disposal of its stake in Universal Prints und Handel Verlag and of shares in farmatic biotech energy already this year, Capital Stage expects a positive annual result from venture capital in 2002 as well. The company’s portfolio of 20 investments, mainly in start-up and expansion stage new energies, biotechnology, IT, new media and advanced technology companies, is valued at around EURO28 million. The company plans to sell some of its investments in order to make new commitments, but it is not known at this stage whether the portfolio will increase or decrease overall.
Capital Stage will ditch its loss-making banking activities, including M&A, underwriting, post-IPO support services, share and bond trading, derivatives, institutional sales, market making, research and designated sponsor services. It also plans to sell over 50 per cent of stockbroker Capital Stage Brokerage, of which it is the sole owner, by the end of the year.