February 4, 2021 is a memorable day in the history of the online used car trading platform Auto1.

It was the eagerly awaited first day of trading on the German Stock Exchange in Frankfurt.

A day like this shows what a company is worth to investors.

So also what value they attach to the years of development work by the company founders Christian Bertermann and Hakan Koc.

But it is also the day when the work of the investment banks is judged.

Were they roughly correct in estimating the value of the shares before the IPO, or were they wrong?

Daniel Mohr

Editor in the economy of the Frankfurter Allgemeine Sunday newspaper.

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On February 4th it became clear that you were wrong. Far off. They estimated the value of a share at 32 to 38 euros, and the shares were ultimately sold to the new shareholders for 38 euros. And the first stock price? 55 euros! 45 percent price increase. Something like this is a rarity on the Frankfurt Stock Exchange. Most stocks are teetering around their issue price and can often only be stabilized with difficulty by the accompanying investment banks so that the newspapers cannot write about a flop. Auto1 is the opposite of a flop. The investment banks have apparently given away the shares far too cheaply. Evidence seems to have been provided that real money can also be made with German IPOs. That the Frankfurt Stock Exchange is one where tech companies have a good environment and investors are ready for high prices.

But the story doesn't even last a trading day.

Already on February 4, the course begins to crumble.

And does so to this day.

50 euros, 40 euros, 30 euros, 20 euros: no brand lasts long.

The investors at the IPO, who paid 38 euros for a share, are now more than 50 percent in the red.

Those who struck on the first day of trading have lost 70 percent to this day.

No stock market newcomer in Germany has been punished in this way in recent years.

Eight billion market value lost

But why? Auto1 brings more than 11 billion euros to the stock exchange on the first day of trading, more than some Dax values. The expectations are high. So it's not just any small stock market smack, but one of Germany's great hopes for growth. The share was included in the M-Dax in June. But that didn't slow down the price drop any more than the company achieved or increased its annual targets.

Auto1 is active in online used car sales in Europe. A very popular market in 2021, because car manufacturers were often unable to deliver new cars due to a lack of chips. The demand for used cars rose accordingly. Auto1 was able to procure plenty of cars, was always able to deliver and bought more than 600,000 used cars as planned (up 39 percent on the previous year) and sold almost 600,000 (up 30 percent). The young Autohero division grew by more than 300 percent. Here, customers can have their used cars delivered to their homes with a click of a button from the comfort of their couch. At the IPO it was communicated that the development of Autohero would cost a lot of money and that investments would be made in marketing. That's why the Autohero lettering is currently emblazoned on the German jerseys at the European Handball Championship,as well as on the shirts of Hertha BSC Berlin in football. Autohero is also an advertising partner of Paris Saint-Germain and the DTM racing series. Too expensive a marketing disaster like Teamviewer experienced at Manchester United?

"It all makes sense at Autohero," says Oliver Wojahn, CEO of the independent equity research firm Alster Research and previously head of equity research at Berenberg Bank.

He advises buying the Auto1 share with a price target of 30 euros (current price on Monday 14.50 euros).

Unlike Teamviewer, Auto1 with Autohero and wirkaufendeinauto.de is dependent on brand awareness among end customers.

"In 2022 we expect a further increase in sales of 35 percent to 6.1 billion euros and an operating loss of 132 million euros, roughly the same as in the previous year." this is apparently no longer the case.