Orrick Legal Ninja Snapshots
27 minute read / 46 minute listen | August.18.2026
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So, you've built a German tech company that's actually working. Revenue is growing, your product has traction, and you're starting to think about the next big step: going public. But here's where it gets interesting – you face a choice that most American start-ups never have to think about:
This isn't a trivial question. Get it right, and you could access billions in growth capital, achieve a valuation that reflects your ambitions, and position yourself for strategic opportunities. Get it wrong, and you might waste millions on legal and compliance costs or trap yourself in a home market that systematically undervalues your company.
This OLNS Snapshot reflects our experience advising tech companies through IPO processes on both sides of the Atlantic. We've seen what works, what doesn't, and where founders waste time and money. We're lawyers, so we care about getting the structure right – but we also understand that structure serves strategy, not the other way around.
The corporate structures we present are based on the approaches commonly used by successful German-rooted start-ups that have completed listings in the United States. These structures differ significantly from the typical early-stage GmbH structure most German start-ups begin with. Why? Because investors in U.S.-listed companies prefer certain corporate forms that facilitate trading, governance, and compliance – and a GmbH cannot go public, neither in the U.S. nor in Germany. This means a reorganization of your corporate structure will be necessary before going public, no matter which side of the pond you choose.
What kind of reorganization? You might have heard of a "Delaware flip" – where a German company becomes a subsidiary of a newly created U.S. parent corporation.
For a detailed presentation of Delaware Flips for German Start-ups see our Guide OLNS#7: Flip it Right.
While Delaware flips are common in earlier private financing rounds for a variety of reasons, including attracting U.S. venture capital, they're rarely used as a pre-IPO reorganization structure, primarily for tax reasons we'll explain later. That being said, if a German start-up has previously completed a Delaware flip, it can elect to do a "classical" U.S. IPO, as the U.S. Inc. form is perfectly suited for listing on the NYSE or NASDAQ. However, if setting up a Delaware holding entity is not an option for any reason, German companies pursuing U.S. IPOs typically reorganize into one of two structures: a German or European SE (Societas Europaea) or a Dutch N.V. (Naamloze Vennootschap). We'll walk through each option, explain when each makes sense, and show you what some German start-ups have actually done.
A brief note on scope: This Snapshot provides a strategic overview of your key options and trade-offs. IPO structuring is complex, and every company's situation is unique – this guide is designed to give you a solid orientation for productive conversations with your relevant stakeholders and advisors by walking you through:
Let's dive in.
Here's the pitch American investors have been making to German founders for years:
The U.S. public markets have historically provided higher valuations for technology companies than European exchanges. McKinsey's analysis of technology IPOs between 2015 and 2023 found that the average market capitalization of these companies at IPO was USD 2.2 billion in the United States, compared with USD 0.9 billion in Europe (154% higher). Over the same period, the aggregate market capitalization of U.S. technology IPOs reached USD 1.65 trillion, compared with USD 142 billion in Europe, reflecting both a larger number of technology IPOs and higher valuations per company in the U.S. These findings indicate that high-growth technology companies generally have access to deeper pools of capital and higher public market valuations in the United States than in Europe.
This valuation premium reflects not merely the listing venue itself, but also structural characteristics of the U.S. capital markets, including greater liquidity, a larger base of specialist technology investors, stronger analyst coverage, and a broader universe of comparable publicly listed companies.
Similarly, the U.S. tech-focused venture capital and crossover markets significantly exceed their European equivalents in both scale and specialization. Crossover investors – institutional investors like hedge funds, mutual funds, and asset managers who invest in late-stage private companies before they go public, then continue holding shares after the IPO – have developed sophisticated frameworks for valuing pre-profit, high-growth companies. These capabilities, while growing in Europe, remain more concentrated and mature in U.S. markets, frequently translating directly into higher valuations for companies that fit the investors' target growth profile.
In addition, U.S. exchanges command significant valuation premiums, with the Nasdaq Composite trading at 31.5x P/E and the S&P 500 at 25.3x P/E as of today – significantly higher than major European and Asian indices. This premium reflects not just market sentiment (some might add "…and a lot of optimism bordering on euphoria…") but also superior liquidity and analyst coverage.
A stark illustration of the challenge: some German tech companies trade at market capitalizations equal to or below their cash holdings. If your company has €50 million in the bank and your market cap is €50 million, the market is effectively valuing your entire business, technology, team, and future prospects at zero.
However, this can be as much of a reflection of European market dynamics as any actual concerns relating to the fundamentals of your business. Limited institutional investor interest in mid-cap European tech stocks creates a challenging cycle: low liquidity leads to depressed valuations, which further discourages institutional participation. The result is persistently low share prices and a declining number of mid-sized listed tech companies in the German market. For companies that cannot attract sufficient capital in their home market, accessing deeper pools of growth capital elsewhere becomes a strategic imperative.
Even if your German company is attractive to U.S. institutional investors, structural barriers might make it difficult for that capital to reach you.
While the focus of this Snapshot is generally Germany, we would note that similar frictions and impediments apply in connection with listing on other (non-German) European exchanges as well. A U.S. listing removes these barriers, making your stock accessible to the world's deepest pool of institutional capital.
A U.S. listing increases visibility among American corporate acquirers, who typically monitor U.S. exchanges more closely than foreign markets when identifying acquisition targets. U.S. tech giants conducting acquisition screening typically prioritize U.S.-listed companies due to familiarity with regulatory frameworks, simpler due diligence processes, and more straightforward transaction structures. U.S.-listed companies file standardized SEC disclosures (10-Ks, 10-Qs, 8-Ks) familiar to American acquirers, significantly reducing due diligence complexity and timeline compared to navigating foreign regulatory frameworks and accounting standards.
Beyond M&A, a U.S. listing can enhance brand credibility with North American (and global) customers and partners, signaling financial stability and growth trajectory in a market that values public company status, and providing validation, as well as ease of access to information, for potential counterparties (for example, imagine you are considering a new engagement with two substantially identical companies for a critical business need and don't have a prior relationship with either – one of the companies is private, providing certain diligence information on request, the other publicly listed in the U.S. – knowing nothing else, would you have greater comfort working with one versus the other?).
That being said, while brand visibility and M&A positioning are valuable benefits, they typically serve as secondary considerations rather than primary drivers of the decision to pursue a U.S. listing. The cost and complexity of a U.S. listing is generally not justified by visibility alone – these benefits amplify the value of deeper capital access and higher valuations, but don't replace them as core rationales.
So why would you ever consider doing an IPO in Germany instead of the U.S.? Well, in the right context, a German listing can offer compelling advantages that can outweigh the opportunities provided by the U.S. markets – particularly for companies with strong European market focus, operational complexity concerns, or strategic considerations that prioritize long-term sustainability.
So, before you book your flight to New York, hear Germany out. It's not just home-team loyalty talking.
Let's talk numbers: setting aside the cost of going through the listing process (easily $5,000,000 and more just for legal, auditors and certain other advisors), maintaining a U.S. listing will cost you several million dollars annually in fees and compliance costs. The initial Nasdaq listing fee alone runs $150,000-$295,000, with annual fees of $155,000-$500,000 depending on market capitalization. But that's just the beginning.
SEC (i.e., the U.S. Securities and Exchange Commission – the U.S. equivalent of BaFin) compliance costs can add millions annually for legal counsel, specialized auditors, investor relations firms, and the consultants needed to maintain SOX (Sarbanes-Oxley Act) compliance. SOX requirements mandate that you document and test every significant financial process in your company, then have external auditors verify your internal controls work properly. This means mapping every way money flows through your business, documenting who approves what, and proving your systems prevent errors or fraud. And while there are some current proposals by the SEC to limit some of the reporting and compliance burdens faced by companies listed in the U.S., it is not clear yet when (and if) they will be adopted and, even if they are, if market participants will change their behavior from what investors and lenders have become used to.
For context: a 2025 report by the U.S. Government Accountability Office suggests $1.8 million in SOX compliance costs for companies with over $10 billion in revenue and $1 - $1.3 million for companies between $1 - $10 billion in revenue. On top, a typical mid-cap U.S.-listed company spends $500,000-$1 million in SEC reporting costs (though that number can potentially be lowered if the company does much of its 10-Q and 10-K reporting in-house), $300,000-$800,000 for investor relations, and $200,000-$500,000 in exchange listing fees. For a growing scale-up, this can represent a massive administrative burden that diverts management attention from actually building the business.
German listings – particularly on segments like Scale (the growth segment of the Frankfurt Stock Exchange) – have dramatically lower entry and ongoing costs. Total annual compliance costs typically run €300,000-€800,000 – roughly one-fifth of U.S. equivalents. You avoid complex SEC reporting requirements, US GAAP accounting standards (IFRS is accepted in Germany – though to be fair, IFRS as promulgated by the IASB is also permissible for Foreign Private Issuers that list in the U.S.), and the extensive documentation requirements that come with U.S. public company life. Your existing German legal and accounting advisors already understand local regulatory requirements, reducing the need for expensive cross-border coordination and the risk of miscommunication on complex compliance matters.
Post-listing performance varies significantly by company, sector, and market timing. However, it is important to recognize selection bias in evaluating U.S. vs. European listing outcomes: companies pursuing U.S. listings often do so precisely because they face capital constraints or valuation challenges in European markets. Their subsequent performance may reflect these underlying business challenges rather than the choice of listing venue.
German companies with strong European market positions, healthy business fundamentals, and sustainable growth trajectories may achieve better long-term performance by avoiding the distraction and cost burden of U.S. compliance while focusing on operational execution.
Here's a data point that might surprise you: According to a report published by the New Financial in April 2025 – "A reality check on international listings" 70% of European companies that moved to the U.S. are trading below their listing price. Less than a fifth have beaten the S&P 500, and three quarters have not beaten the European market since they moved.
According to this statistic, European companies can perform better staying home, suggesting that the premium valuations promised by U.S. markets may not materialize or be able to be maintained in actual trading performance for companies without compelling U.S. market fit.
That being said, a fair counterpoint (that the report does not address) would be to ask how much money those companies were able to raise in the U.S. public markets while U.S.-listed. After all, someone could rationally take a trade-off in fundraising ability vs an increasing valuation but limited access to equity capital.
As already mentioned, it is questionable whether this proves that German listings inherently perform better, rather than being a consequence of the systematically lower valuations in German markets, given that companies with a lower valuation at listing also have less room to fall.
Ask any founder who's managed a listing, it is exhausting. Now imagine doing it across the pond. U.S. market hours (9:30 AM - 4:00 PM Eastern) translate to 3:30 PM - 10:00 PM Central European Time. Earnings calls typically occur at 5:00 PM ET (11:00 PM CET), requiring your CFO and CEO to be sharp and responsive late at night, then return to normal management duties the following morning. During earnings season, this pattern repeats quarterly, creating sustained disruption to executive productivity and well-being.
Post-IPO, maintaining relationships with U.S. institutional investors requires 4-6 trips annually to major financial centers, each lasting 3-5 days. The cumulative toll on management bandwidth can be substantial.
Beyond logistics, a German listing connects you with European institutional investors who (hopefully) understand your market, customer base, regulatory environment, and competitive landscape. U.S. investors may struggle to appreciate nuances of European B2B sales cycles, GDPR implications, or regional market fragmentation – factors that European investors navigate daily. This operational convenience might sound trivial compared to valuation multiples and capital access (…we hear and understand the frustrated "European investors don't get what we are doing"…), but management focus and execution quality matter enormously when you're trying to build a company for the long term.
Strategic factors may make a German listing the superior choice regardless of valuation or cost considerations:
European capital markets have matured significantly over the past decade. The rise of specialized European tech investors (Atomico, Accel Europe, Balderton, Eurazeo, and others), improved regulatory frameworks (including ELTIFs and Capital Markets Union initiatives), and growing liquidity on major European exchanges have started to narrow the gap with U.S. markets.
Companies like Adyen (Dutch fintech, listed Amsterdam), TeamViewer (German software, listed Frankfurt), and others have demonstrated that European companies can achieve substantial scale and valuation through European listings. The European ecosystem increasingly supports growth-stage companies through IPO and beyond.
Here's the reality: strategic fit and operational convenience matter – until you need hundreds of million EUR to scale and discover it's only available in New York. At that point, theory meets capital allocation, and capital wins.
So let's talk about how you actually get your hands on that American capital. There are two ways that allow the company to get direct U.S. capital market access, and one hybrid / indirect option we'll save for the second part of this Snapshot. In the remainder of this Part 1, we will show you two ways to get U.S. Market access – the all-American way and a European alternative.
In Part 2, we will discuss an indirect option:
Let's start with the all-American approach. This approach requires a U.S. holding entity, usually a Delaware C-Corporation that will become the listed entity in the U.S. This U.S. holding entity will hold the operating German start-up entity (i.e., your start-up). The process of getting into this two-tier U.S./German holding structure (i.e., U.S. HoldCo and German OpCo) is called a "(Delaware) flip".
Delaware is the overwhelming choice for U.S. incorporations – over 60% of Fortune 500 companies and 90% of U.S. IPOs – due to its specialized Court of Chancery, well-developed corporate law precedent, and flexible governance provisions. In recent years, Texas has made several attempts to become the organizational destination of choice for U.S. companies and a number of companies have decided to incorporate (or, as in the case of SpaceX, the most famous example, re-incorporate) in Texas. However, Delaware continues to maintain its dominant position and is almost universally chosen for the flips of German start-ups we have advised, and this Snapshot assumes that Delaware remains the preferred choice.
The shareholders of your German company would then exchange their shares for shares in your newly created Delaware parent company pro rata to their shareholdings – if you owned 10% of the German company, you'll own 10% of the Delaware parent (at least on a fully-diluted basis – keep in mind that German employment programs are still often virtual ones or profit participation rights that only show up on the fully-diluted cap table). Your German OpCo continues as a going concern (existing contracts with employees, suppliers, and customers continue without interruption) but is now wholly owned by the Delaware corporation as a parent holding company.
While Delaware flips are common during early-stage private fundraising to attract U.S. venture capital, they are rarely implemented as a pre-IPO reorganization for companies that haven't already flipped. Why? The German tax burden (explained below) makes flipping immediately before IPO economically painful, and alternative structures (like the FPI approach covered next) achieve similar U.S. market access without triggering German exit taxation. Most German companies pursuing U.S. IPOs either flipped years earlier during private rounds, or use FPI structures instead.
A late(r) stage flip comes with substantial costs and complexity that can outweigh the benefits – especially for companies implementing flips.
From a German tax perspective, the flip is considered an exit triggering capital gain taxation on the spread between the fair market value of the shares at the time of the flip and the respective shareholders' initial acquisition costs of such shares. This can create potentially very significant tax liabilities for shareholders without corresponding cash proceeds. This is "dry income" – you report taxable income and pay taxes without receiving actual cash. Another issue can be the restructuring of existing employee participation programs at the German company-level if the company wants to move existing programs up to the level of the new U.S. holding entity, which may be desirable to allow the listed equity to be delivered on exercise or settlement of equity awards in the future, as well as to limit minority interests at subsidiaries of the U.S. parent entity.
So, using a Delaware C-Corp structure to pursue a U.S. IPO makes sense if you've already flipped during earlier private rounds and the dry income tax consequences are behind you. But keep in mind: As a U.S. domestic issuer, you face the full U.S. public company compliance burden we discussed in Chapter I: converting historical financials to US GAAP (expensive and time-consuming), filing quarterly reports (10-Qs) in addition to annual reports (10-Ks), and meeting all U.S. domestic issuer compliance requirements including SOX 404(b) auditor attestation – effectively two full audits (management assessment + auditor attestation) instead of one. You pay for both.
And while the SEC has proposed rules that would make quarterly reporting by U.S. filers optional, even if these rules are implemented as proposed, investor expectations may still necessitate quarterly reporting on a basis consistent with the current regime (and, for example, lenders and bond investors are unlikely to accept less than quarterly financial updates).
So if you're starting fresh with IPO planning and haven't already flipped, the Foreign Private Issuer approach we'll cover next is almost always superior – achieving a U.S. exchange listing and capital access without German exit taxation or full U.S. domestic issuer compliance burdens.
Under SEC Rule 3b-4(c)1, a Foreign Private Issuer is any non-U.S. company, unless:
Most German companies with primarily European operations, European management teams, and limited U.S. shareholding easily qualify as FPIs.
To list as an FPI with your ordinary class of common shares listed on the NYSE or Nasdaq, you need an EU entity structure whose corporate law permits freely transferable shares without notarization requirements and allows for an adequate corporate governance.
While a German stock corporation (Aktiengesellschaft) or a German SE could theoretically qualify as an FPI, various legal issues and incompatible global clearing mechanisms (Clearstream vs. DTC) make these German legal forms unsuitable. German start-ups need a different FPI route and there are three primary options (each with pros/cons).
So far, the FPI structure through a Dutch N.V. or Luxembourg SE holding company is the recommended approach for most German companies seeking a U.S. exchange listing. Either would provide full access to the U.S. capital markets and institutional investors while avoiding German exit taxation, maintaining IFRS accounting, and reducing ongoing compliance burdens compared to U.S. domestic issuer status.
That being said, all of these approaches require complex corporate restructurings (getting into an N.V. or SE (holding) structure) the details of which we cannot discuss in this Snapshot and we will limit ourselves to some high-level observations.
Unlike the Delaware flip, reorganizing into a Dutch N.V. or Luxembourg SE can (initially) be tax-neutral for German shareholders if structured properly under the EU Merger Directive (2009/133/EC) and German Reorganization Tax Act (UmwStG §§ 20-23).
A share-for-share exchange where German shareholders receive N.V. or SE shares in exchange for their GmbH shares can qualify as a tax-deferred reorganization, avoiding the immediate German exit tax that plagues Delaware flips (the tax is only deferred and will be triggered in case of a future sale of the SE or N.V. shares provided that the tax burden will be reduced by 1/7th for each year after the contribution). This requires:
The process is rather complex and will take a few quarters.
Most importantly, you get full NYSE or Nasdaq listing and U.S. capital market access while maintaining significantly lighter reporting requirements compared to U.S. domestic issuers:
In addition, compensation disclosure requirements follow your home country's rules, avoiding the detailed individual compensation breakdowns required for U.S. domestic issuers (which mandate disclosure for top 5 executives). In Germany there is a saying "über Geld spricht man nicht" – you don't talk about money. As an FPI, you can maintain this cultural standard. However, one practical note based on our experience: While regulatory disclosure is lighter, institutional investors may still request compensation information in private discussions.
Interestingly, some companies that establish an FPI-suitable structure ultimately choose to do their primary listing in Germany rather than the U.S. and then tap into the U.S. capital markets indirectly. We'll explore this hybrid approach – and real examples from German companies – in Part 2 of this Snapshot.
So far, we've covered the case for and against a U.S. listing and walked through two corporate structures that get you there: the Delaware C-Corporation for companies that have already flipped, and the Foreign Private Issuer route via a Dutch N.V. or European SE for those that haven't. Both paths can lead to listing directing on Nasdaq or the NYSE – but both also require a fundamental restructuring of your corporate identity and a commitment to the U.S. regulatory environment.
But what if you're not ready for that commitment? What if you want to test the waters with U.S. investors without leaving your German home market – or what if your capital needs are substantial but don't justify the full cost of a U.S. primary listing?
In Part 2, we'll cover a third way: listing on the Frankfurt Stock Exchange while still tapping into U.S. capital through ADR programs. And then we'll look at what 25 German-rooted start-ups actually did – which structures they chose, which markets they targeted, and how it turned out for them.
[1] Recently, the SEC has published a proposal to update the FPI definition but that one has not moved forward yet, for details please see: https://www.orrick.com/en/Insights/2025/06/SEC-Considers-Revising-Foreign-Private-Issuer-Definition