Siemens energy traded at a lower valuation than expected on monday as it suffered a volatile opening on its frankfurt stock exchange debut.

Shares in the industrial conglomerates energy spin-off dropped nearly 10 per cent before recovering to trade 1.2 per cent lower at 21.75 by late morning in germany.

This valued the companys equity at about 16bn, lower than internal predictions.

Last week, a person close to siemens said they expected the company to reach a value of about 21bn, although stressing trade would be volatile as investors whose portfolios track the dax index automatically divest.

Analysts at ubs said they expected siemens energy to reach a valuation of 18.8bn, or 26 per share, over the next year.

The spin-off of the energy division is the latest move by the european conglomerate to shrink its business in an effort to turn the company into a more manageable entity.

Siemens hopes to erase a so-called conglomerate discount, which the company believes is responsible for its stock being undervalued by up to 30 per cent, as shareholders prefer simpler, more streamlined investments.

The energy arm, which employs more than 90,000 people worldwide and has annual revenues of almost 29bn, specialises in gas turbines, power generation and transmission and has a growing renewables arm.

As a standalone business, siemens energy, whose products are involved in generating one-sixth of all electricity generated worldwide, aims to benefit from helping customers transition to cleaner technologies, and grow its lucrative service business.

The new company, which will be based in berlin, said it had a backlog of service contracts worth 48bn at the end of june.

As part of the spin-off, existing siemens shareholders were given one siemens energy share for every two existing shares they owned in the parent company, making up 55 per cent of the new business ownership at its listing.

Initially, siemens will retain 35.1 per cent of siemens energy, which the munich-based group hopes to sell down over the next 12 to 18 months, while a further 9.9 per cent will be owned by the siemens pension trust, which is likely to also sell some of its stake.

The spin-off comes more than two years after siemens listed its medical technology arm, siemens healthineers, in which it still owns a majority stake.

Both siemens healthineers and siemens energy could soon be eligible for promotion to germanys blue-chip dax index as independent companies, providing enough of their shares are freely traded.

While siemens energy will be run as a separate business, former siemens chief executive joe kaeser will lead its supervisory board.

The companys incoming boss insisted that this arrangement would not create a conflict of interest.

I think we have a clear, shall i say, division of responsibility, siemens energy chief executive christian bruch told the financial times last month.

I run the company and joe provides me advise and supervises me, which i really appreciate.

Additional reporting by olaf storbeck in frankfurt.