Effecten-Spiegel AG is an organisation committed to defying the status quo. Instead of running one business, it runs 2 — an investment company and a weekly financial journal, all with a lean workforce of 10. Instead of relying on advertisers to fund its publishing arm, it remains wholly independent. Instead of relying on banks for finance, it raises its own capital through direct investors.
Rather than stand by and allow injustice to unfold the share market, Effecten-Spiegel has even taken some of Germany’s biggest companies to task in several complex, long-term High Court proceedings to gallantly protect the rights of small shareholders. And unlike many companies listed on the German Stock Exchange, Effecten-Spiegel has a sole female CEO — a livewire all-rounder named Marlis Weidtmann.
A force to be reckoned with
Since taking over as head of Effecten-Spiegel in 2007, Marlis had already clocked 10 years with the company, much of which was spent at the right hand of former CEO and founder Bolko Hoffman. Since that time, she has seen the business grow its reach to a balance sheet of more than €74 million, raised significant capital without any assistance from the banks, taken over several business interests, won several legal disputes on behalf of small shareholders, and led the publishing house into the digital age.
“I asked [Bolko] why he chose to take me on. He said that most of all he liked that I didn’t seem to be afraid of him … It also probably didn’t hurt that I could work a computer at a time when electric typewriters were still being used.” – Marlis Weidtmann
During his time, Effecten-Spiegel founder Bolko was a force to be reckoned with and served as big shoes for Marlis to fill — though she has done so most impressively. Initially founding his own advertising agency, Thersal, and working as a stock market speculator, in 1979 Bolko was one of the founders of the Hoffmann Civil Party and was elected its deputy chairman. From 1983 to 1994, he was the owner of the news agency ddp, which he acquired in a bankruptcy and later sold to Wolf E Schneider. He also served as a rather controversial chairman at Hunzinger Information (now operating as Infas Holding), where his first act was to dismiss the company founder in 2004.
In 1998, multimillionaire Bolko also ran an aggressive campaign against the introduction of the Euro as Germany’s official currency. Part of this effort saw him create the Initiative Pro D-Mark party in Düsseldorf in 1998, which he funded out of his own pocket. The initiative’s primary goal was to preserve the deutschmark and prevent the roll-out of the Euro as Germany’s new form of currency. Effecten-Spiegel itself was founded by Bolko back in 1972 to engage in the acquisition, the administration and management of shareholdings, while also publishing a weekly independent investment journal.
Since its inception, the Effecten-Spiegel magazine publishes news, research and opinion pieces related to stock market investments, banks, politics and the economy. This complements its core stock exchange business, which invests in — and trades — the shares of other companies. Bolko remained boss of the investor–publisher until he passed away in 2007, after which Marlis stepped in as his successor. Effecten-Spiegel has now recently celebrated its forty-fifth birthday, making it one of the oldest businesses of its kind in Germany.
Eloquent all-rounder
Marlis herself also comes from a multifaceted background. “My career has not developed in a straight line; there have been some detours along the way,” Marlis says. She originally studied German language and history, planning to work in linguistics before taking on various secretarial and journalistic roles. In 1989, Marlis was present at the infamous roundtable discussion concerning East German unification, which she says was an extraordinary experience.
When Marlis eventually joined the Effecten-Spiegel team in 1997, she says Bolko was on the hunt for an “eloquent all-rounder” to join the team. “A couple of years after I had started working for him, I asked why he chose to take me on,” Marlis recalls. “He said that most of all he liked that I didn’t seem to be afraid of him at all,” she laughs. “It also probably didn’t hurt that I could work a computer at a time when electric typewriters were still being used.”
When Marlis was first recruited, Effecten-Spiegel was in the process of becoming a publicly listed business to be registered on the stock market, and Marlis was brought onboard to assist in the transition. “When I first applied in early 1997, the company faced major challenges. They were seeking a large capital increase without the involvement of banks to serve as part of an initial public offering so we could be listed on the stock exchange,” she says. With the many challenges this presented, she quickly expanded her professional experiences and skill set, being promoted to become “the right hand” to Bolko and onto the board of directors by 1998. Keen to gain even more knowledge, she began attending lectures for accounting at the Open University Hagen.
Feeling that this still wouldn’t be enough, Marlis also undertook studies in economics, graduating in 2004 — just 3 years before she would be named Bolko’s successor and Effecten-Spiegel’s new CEO. A brief career progression, sure, but she has proved more than worthy of the role. She has also served as the sole member of the management board, and is the only woman in a publicly listed German company to hold a managing director title. Marlis has now been CEO for 10 years, marking her twentieth year in the business in total. “It was only logical that I would continue on in Bolko’s footsteps and take over the company after he passed away,” says Marlis.
“He set the bar very high, having built the company from nothing and leading it for more than 35 years. It was an extreme situation and a difficult assignment, but also an obligation to me.” The challenges only grew in number and severity, however, with the collapse of the Lehman Brothers bank in 2008, sparking the beginning of the global financial crisis. “This wasn’t exactly an ideal starting point for me, but we got through it,” adds Marlis.
Independent & objective
A big differentiator, as well as a key value for the company, is its refusal to accept any third-party advertising for its weekly journal. Marlis says that the magazine aims to always be an independent publication, both financially and in its ability to report objective news and opinion that is not unduly influenced by advertising clients. Maintaining this has been a bold move on the part of the publisher, with many competitors needing to turn to advertisers in a time of major disruption in the sector or face potential bankruptcy.
Further, where once advertising played the role of a supplement to editorial content, it has begun to dominate page space. Research by Hall’s Reports in the US found that in 1970, the ratio of advertising to editorial in magazines was 45 % to 55%, and as of 2011 those figures had flipped (55% advertising to 45%editorial). Effecten-Spiegel has successfully bucked this trend to not only become the only magazine in European stock markets that is not supported by advertising income, but with the journal’s launch almost 46 years ago, it is also one of the oldest publications in Germany.
Marlis says a key to the company’s continued survival and strength is its core work in the stock markets, acquiring and trading shares from other organisations. “The decision not to accept advertisers was made when the company was founded. A main part of our value proposition is we provide impartial reporting on economic events and financial news. This is only possible if we don’t rely on banks and advertisers for financial support,” she says. “This has earned us the trust and respect of our readers. And we are also liberated to publish our own opinion pieces or research without any conflict of interest and to provide our readers and shareholders with food for thought.
“It was a groundbreaking thing to start a journal like this in 1971. Bolko was considered a pioneer in Germany for doing so. Over the years, we have seen many other magazines launching to compete with us, but many of them have died out and Effecten-Spiegel
is still here.” This is not to say the unique business model doesn’t present major challenges for the company, such as working to ensure that, since the key income for the publisher is based on journal sales, subscriptions remain consistent and, if possible, on the rise. To ensure this, after some reluctance first from the organisation, Effecten-Spiegel has also launched its online edition, called effecten-spiegel.com.
The digital push
While the digital push comes, in part, due to new digital-only publishing competitors, Marlis says that most of all it serves to cater to changing consumer trends and preferences. Many of Effecten-Spiegel’s readers had voiced their preference for subscription offers to include both a print and digital bundle. As a result, Effecten-Spiegel online was officially launched in February 2015, after a thorough in-house website development effort. Users can access the publication’s content across all devices including PCs, laptops, tablets and smartphones.
“The online edition is intended to function only as a supplement to the print publication rather than a replacement; our core focus is still on print,” says Marlis. “That’s because a digital publication will never earn any money, based on user trends, so it must serve as just an add-on.”
“Print hasn’t lost its importance or relevance … We have continued to invest in our core product, giving the print magazine a facelift.” – Marlis Weidtmann
One top advantage that the publishing house now has with digital is the ability to better cater to its significant readership in countries outside like Switzerland, Austria and Canada. Another benefit is the new ability to monitor access to the website much better than they could ever follow the print statistics, thanks to online analytical software and tools to track website traffic.
“It turns out that our readers are less interested in how good the content is and are much more responsive to whether they have to pay for it or not. If you compare data on every article we publish for free compared to those behind the paywall, we actually get 3 times as many hits on the free pages,” explains Marlis. “Therefore, with the online version, we end up with many more readers than subscribers.” The general trend in digital magazines seems to be a declining willingness to pay for content. In most countries, the percentage of users paying for online news is around 10 % on average. For Germany, it is even fewer, with just 7%, according to research by the Reuters Institute.
“Nobody has made many profits out of online yet. Even the biggest German publishing houses aren’t raking in revenue with their online portals. That’s why the print version will stay the core product, because to us there is not much money in online services alone. Print hasn’t lost its importance or relevance; in fact, I believe there will soon be a renaissance for printed content,” says Marlis. As the company’s expansion into the online realm was done with great caution, some saw their reluctance as being behind the times. Marlis rejects the criticism, however, believing it was important for the business to take things at their own pace and identify demand, rather than go digital for digital’s sake. In fact, she believes the slower transition gave them a competitive advantage.
“Launching the digital version later than many others served us quite well, because we didn’t have to reinvent the wheel. Many strived to get in as fast as possible and iron out the kinks as they go, but we were able to observe the market and learn from our peers, so we don’t make the same mistakes they did,” she says. “Developing the site in-house also maintains our independence, and while this involved some investment on our part, we now find the running costs are quite low.” The key focus, moving forward, is to continue to attract new digital subscribers, while also working to constantly improve the platform’s offerings.
“We have continued to invest in our core product, giving the print magazine a facelift. We’ve expanded it to be newspaper size, and have added in more formal pages and opinion columns. We want to lead the dialogue and create more quality information around finance, business and politics,” says Marlis. The Effecten-Spiegel strategy for investment outside of its publishing arm — that is, on the stock exchange — has also required constant monitoring and revision to improve the company’s tactics and overall returns. Under Marlis’s leadership, Effecten-Spiegel’s portfolio of investments now has an impressive equity ratio of around 96%.
A sustainable returns strategy
The company’s own stock valuation system has shown great strides due to its own investment selection process, which requires good analysis to suit a sustainable returns strategy that caters to its shareholders, since its own shares are Effecten-Spiegel’s main product for outside investment. “Since we pay dividends to our shareholders, we must handpick our own investments very carefully to achieve an efficient risk distribution,” says Marlis. This is achieved with a strategic portfolio that embraces a diverse set of investments that are not likely to be influenced by political risk or fluctuations in currency.
“In the past 2 years, we have undergone some major changes in the market due to inflation of the Euro,” says Marlis. “We invest in different branches and regions, but we mainly focus on the US and European markets. At the moment, the US dollar and the Swiss franc represent good, stable investments to us.”
When considering which companies to purchase shares from, Effecten-Spiegel will undertake an intensive analysis of the organisation including its balance sheet, its management team, its product or service, and the market it operates in.
“Those are elemental figures, but we also sometimes try to have a look at the technical charts to learn more around how the business is faring,” Marlis explains. “We only invest in companies with sound business models and good management.” Reflecting on the market, Marlis laments that the old rules for investment no longer apply. ‘Safe’ investments have become few and far between due to an increase in leverage or borrowed capital, which Effecten-Spiegel steers clear of. “This often means the length we hold shares will inevitably be shorter,” says Marlis. “Nowadays, we too often have to buy stocks from companies or banks that have been bailed out by the government, and the financial markets act as part of that rescue operation. To protect against that, we don’t make state investments anymore. We have made our own rules for investing and divesting, and we are continually reviewing and fixing these as needed. In the years to come, our focus will be on investment management and to provide our shareholders with good dividends,” Marlis adds.
The fight for shareholder rights
Protecting the rights of shareholders is a critical foundation for Effecten-Spiegel. Even during the financial crisis years, Marlis made sure they proceeded to pay dividends, despite the obvious insecurity in the market. As both a publicly listed company and a shareholder itself, Effecten-Spiegel has often gone above and beyond to protect the rights of small shareholders, including taking legal action against blue-chip companies on numerous occasions when the rights of those companies’ shareholders are at risk. One of the most notable examples was when the publisher–investor fought Deutsche Bank — Germany’s largest financial institution — for the right to fair compensation for shareholders after the bank made a considerable acquisition.
“Our readers are less interested in how good the content is and are much more responsive to whether they have to pay for it or not. If you compare data on every article we publish for free compared to those behind the paywall, we actually get 3 times as many hits on free pages.” – Marlis Weidtmann
In proceedings that have extended over many years, and which escalated to the High Court of Germany, Deutsche Bank’s bid to take over Postbank in 2009 saw Effecten-Spiegel sue the banking behemoth the following year, claiming that the takeover would cheat Postbank shareholders out of €1.6 billion. Effecten-Spiegel disputed the mandatory takeover bid of €25 per share, arguing that Deutsche Bank — which owned 29.75 % of Postbank prior to the GFC at €49.42 per share — was required under German law to pay that original share price for the further 18% of Postbank it acquired, post-recession.
Effecten-Spiegel also argued that the 2 banks had ‘acted in concert’ to plan the takeover in 2008 and that the mandatory takeover was a part of that plan. As of 2014, The Federal Court of Justice ruled that the takeover contract between the 2 companies would be closely examined by the Higher Regional Court, and if the allegations against them are found to be true, small shareholders can demand Deutsche Bank pay the difference in compensation. Marlis says she is optimistic about the verdict being in their favour. “With that case, Effecten-Spiegel made legal history,” she says. “People were wronged, but no-one wanted to sue because there had never been another case like it, but I was convinced it was the right thing to do. It was about more than the money; it was about standing up for the rights of minority shareholders.”
Commerzbank & Volkswagon
Before taking out these legal actions, Effecten-Spiegel will garner the support of small shareholders, taking a vote on whether to proceed with the suit. One such legal battle was a 10-year ordeal against Commerzbank, Germany’s second-largest bank, for the right of small shareholders to be paid off for the shares of Commerzbank’s older institution, Commerzbank AG in 1870, which it hoped to close due to an inability to trade pre-wartime shares on the market. The case was escalated as high as the European Court of Justice before Commerzbank agreed to acquire the old shares for €10.34 each before the closure of its subsidiary.
Effecten-Spiegel was also one of many who filed lawsuits as part of the Volkswagen-Porsche scandal in September, 2015, when Volkswagen admitted to rigging software on 11 million of its diesel vehicles as a means to cheat pollution tests. As a result, VW lost more than a third of its share value in the 2 months following the disclosure of the scandal, and shareholders rushed to sue within a year claiming that VW and Porsche, its majority shareholder, failed to properly disclose the financial risks of the emissions scandal. Effecten-Spiegel alerted fellow shareholders to their legal rights and helped to streamline the process for them to take out a lawsuit against the auto giant. Currently there are 1,600 shareholders which Effecten-Spiegel has helped and supported in the Volkswagen case.
Looking ahead
Looking ahead, Marlis says the business will continue to maintain its 2 pillars — investment and publishing — and improving the digital and print offerings of the journal, while also securing more capital and paying its regular dividends to shareholders. “I love working through the many facets of this profession. Combining stock exchange and finance journalism is a fascinating space, and both fields complement each other so comfortably,” says Marlis. “We have many reasons to keep our finger on the pulse when it comes to global political and economic events, meaning we remain very aware of the appropriate legislation and issues around capital market law. There are few professions that are in touch with so many fascinating things.”