Foreign IPOs Rise

from TheStreet.com

U.S. exchanges are getting more and more foreign listings, even if there’s some concern about their missing out on the biggest ones.

During the first quarter, 19% of the 67 initial public offerings on the New York Stock Exchange (NYX) , the Nasdaq Stock Market (NDAQ) and the American Stock Exchange were foreign-based, according to Dealogic. That’s up from 16% for all of last year.

This year is on pace to add the most foreign listings on U.S. exchanges since 1997, when 86 overseas companies completed IPOs in U.S. markets, according to Thomson Financial. Foreign companies accounted for 23.4% of IPO proceeds last year — the highest since 1994, Thomson Financial says.

The gains come in spite of worries about U.S. securities laws possibly scaring away big foreign deals. China Construction Bank raised eyebrows in late 2005 when it raised $9.2 billion in an IPO on the Hong Kong Stock Exchange. The Industrial and Commercial Bank of China made history just last November when it raised $22 billion through listing shares in Hong Kong and Shanghai.

Observers cite the growth of Asian and emerging markets in general. U.S. investors want more international exposure, particularly from companies based in fast-growing countries such as China and India.

“U.S. investors might be willing to pay a higher value than domestic investors” for foreign companies, says Jay Ritter, a finance professor at the University of Florida. Ritter says the globalization of the capital markets and improved clearing at many exchanges are adding to the foreign-listing appeal.

For the most part, foreign companies are doing fairly small IPOs and are primarily in the healthcare, tech and media sectors.

More here.

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One Response to Foreign IPOs Rise

  1. tommyd March 24, 2014 at 7:48 pm #

    The year 2007 was a big year to invest in foreign companies. This was because the NYSE and NDAQ listed many different foreign companies onto the exchange. “During the first quarter, 19% of the 67 initial public offerings on the New York Stock Exchange, the Nasdaq Stock Market, and the American Stock Exchange were foreign-based, according to Dealogic. That’s up from 16% for all of last year.” Bringing foreign companies to the NYSE and NDAQ has made it much easier for American investors to invest in foreign equities, bonds, and ETF’s. If a foreign company does not have stock for sale on the NYSE or NDAQ, investors must first exchange their money to a local foreign currency in order to buy equity ownership in a foreign firm. For example, if a Canadian company XYZ was listed on the TSX Venture Exchange (Canadian Exchange), American’s would first have to open a global investing account with their brokerage, then exchange USD for Canadian dollars, then buy stock. This is troublesome and creates a hassle for investors looking to diversify their portfolios with foreign companies. Investing in foreign enterprise is a significant part of many companies and individuals portfolios.

    Many foreign companies shy away from listing on the American stock exchanges. This is because of our stringent laws and regulations surrounding public companies. If listed on an American stock exchange, foreign companies would not be able to participate in illegal activity such as bribery. Bribery is a form of common business practice in many countries excluding the United States. If a foreign company is participating in bribery it cannot be listed on an American exchange. Many foreign companies believe that American’s are willing to pay a higher price for their stock than domestic investors. These companies were right considering foreign IPO’s (initial public offerings) rose to double digits in the first year of trading in the United States. This increases corporate capital and is increasingly attractive to foreign companies looking to issue equity or bonds to Americans. For some reason it seems that American’s have a higher risk tolerance than foreign investors. I believe that this is because we are a credit and debt based society.

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