Swiss watchmaking is not in step with its times. At least as far as the subtle art of communication is concerned, and particularly in the field of business reporting. Indeed, secrecy seems to be the name of the game. Nonetheless, a few watchmakers have decided to make a break with this tradition, even if it is far from a tidal wave. For the time being, we are merely witnessing statements of intent, and the decisive move has not yet been made. But what exactly are we talking about? The answer is what Anglo-Saxon countries call an IPO (initial public offering).

In other countries, a number of watchmakers that have decided to open their share capital, including Citizen, Seiko, Movado Group, Bvlgari and the LVMH. Switzerland, the land of watchmaking, continues to cultivate a paradox: the Swiss stock exchange is bereft of watch companies, apart from the two giants, Swatch Group and Richemont. But all this may well change within the next few years, since two companies have expressed an interest, albeit to varying degrees.

The first, Franck Muller Watchland, has clearly expressed its intention of being quoted on the stock exchange. The company, which now encompasses five brands, definitely sees its future on the Swiss trading floor. Above all else, the firm wishes to enable one of its shareholders (Franck Muller himself) to withdraw from the share capital. Many details of this IPO still require fine-tuning, but the group has hired a financial director who has already conducted an IPO (for Unilabs). Luigi Macaluso, boss of the Sowind group (including Girard-Perregaux and JeanRichard) admits to being attracted to the stock market adventure. “It is not entirely out of the question, even if it is not our priority. No decision has been taking, but the idea is gaining ground”, added the “Umberto Ecco” of Swiss watchmaking.

So what are the advantages of an IPO? Most of all, it serves to find ongoing corporate development (funding a new factory, take-overs of suppliers, etc.) and may help its founders (and/or directors) to maintain the desired level of participation. At the other end of the spectrum, a private sale generally leads to a loss of autonomy for the company.

An IPO often reveals certain less specifically industrial or financial intentions, even through the latter remain determining factors. The desire to raise public awareness is often one of the motivations expressed by companies. The publicity surrounding such an operation is considerable and being quoted on the stock exchange ensures permanent visibility.

The media coverage often puts the company in the spotlight well before it actually hits the trading floor. Thanks to the price fixing process as well as the intensive communication prior to the IPO (the roadshow), a company making a public offering often reaches a higher price than if it were sold to private investors.

But it is this very transparency that proves dissuasive for the vast majority of watch companies. The stock exchange regulations would oblige them to open up their accounts. It is indeed hard to imagine firms such as Chopard, Roger Dubuis and many others going public with their turnover, their operating margins and even less so their net profits. Not to mention the inherent consequence of allowing financial analysts to render an often truncated judgement on the value and the prospects of their company.

Nonetheless, an IP undoubtedly also facilitates setting up a profit-sharing scheme for employees, hence leading to improved productivity. Nothing in fact prevents a private company from handing out stock options, but the absence of a going market price and the difficulty of disposing of the shares makes this less attractive.

At the end of the day, an IPO basically enables a change of dimension. One can be pretty certain that the Swiss watchmakers liable to be drawn to the sirens’ song of the stock markets will be few and far between. Independence and the de facto lack of financial visibility will continue to set the tempo.