U.S. exchanges lose their cachet overseas
Big foreign companies, mostly from Europe, are saying "non", "nein" and "nee" to being listed on U.S. exchanges.
A surge of foreign companies, including Bayer, British Airways, BASF, Ducati and Royal Ahold, are bidding adieu to U.S. markets and their American Depositary Receipts.
Having a ticker symbol on U.S. exchanges used to carry cachet for foreign companies. But lackluster trading in many foreign listings and a feeling the costs of having a stock listed in the United States aren't worthwhile is sparking an exodus.
Already this year, 34 foreign companies have delisted from the New York Stock Exchange, and nine more have announced they plan to do so, says the exchange. That tops the 21 foreign companies that have joined the NYSE this year. Another 20 have said this year they plan to leave the Nasdaq or have done so already.
"There are companies lining up to exit U.S. capital markets," says James Angel, professor of finance at Georgetown University.
The reasons for the foreign flight include:
- Easier to leave. The Securities and Exchange Commission in March eased the process to "deregister," or terminate securities, if average daily trading volume is less than 5 percent of a company's worldwide average trading volume over the past 12 months. This rule change was the excuse many companies were waiting for, Angel says.
- Lackluster interest. Trading of many European companies' ADRs has been light, says Susanne Kloess, a global markets expert for Accenture. Ahold, a Dutch grocery store company that owns Giant and Stop & Shop, says average daily volume of the U.S. shares has been less than 5 percent of its total. Most U.S. investors buy its shares on the local Euronext Amsterdam exchange.
- Improved exchanges elsewhere. Foreign exchanges have become more effective in raising capital, says Catherine Kinney, president of NYSE Euronext. Meanwhile, it's getting easier for U.S. investors to trade on foreign exchanges. E-Trade recently let U.S. investors trade stocks listed on foreign exchanges as easily as they can trade on the NYSE or Nasdaq.
- Increased regulatory and other costs. The NYSE listing fee for most foreign companies is $38,000 a year, Kinney says. But fees needed to comply with Sarbanes-Oxley rules and convert books to meet U.S. accounting can add millions of dollars in costs, Angel says.
Regulatory changes are needed, or the U.S. stands to lose its position as the world's money-raising capital, says Rep. Tom Feeney, R-Fla. Feeney is co-sponsoring legislation that will require the SEC to clarify the requirements of controversial Sarbanes-Oxley rules.
Expect the exodus to continue, says Kloess. "You will see more (foreign companies) delisting from U.S. markets," she says. "I'm hearing everyone in Europe discussing it."
WBJ Web Partners
Most Recent
Most Recent
0 Comments