The United States is losing its position as the global leader for IPOs, according to a new survey of American transaction attorneys conducted by KCSA Strategic Communications.
KCSA conducted an in-depth survey of approximately 50 securities attorneys whose firms advised on 75 percent of the initial public offerings listed on major U.S. exchanges in 2010. According to the survey, 71 percent of securities attorneys think the U.S. is losing its share of global IPOs.
“The simple fact is that as the U.S. regulatory environment has become more restrictive, other global exchanges have become more sophisticated and liquid and therefore have gained market share,” says Joshua Ford Bonnie, partner at Simpson Thacher & Bartlett. “Given the difficulties of listing in the U.S., more foreign companies are choosing to list on their home exchange.”
“These data confirm that as transaction activity continues to erase geographic boundaries, it is imperative that companies take into account the various audiences with whom they communicate," says Jeff Corbin, CEO of KCSA. “Regardless of where investors are located, here in the U.S. or overseas, clear communications transcends language barriers and helps companies achieve a fair valuation.”
Despite the U.S.’s declining share of global IPOs, the survey respondents unanimously agree that China will be a strong driver of U.S.-based IPO issuance in 2011. In addition, the attorneys surveyed expect increased IPO issuance from other foreign countries. When asked which foreign countries will drive global IPO issuance, 37 percent of respondents said Brazil and 30 percent said India.
Private equity-backed companies are also expected to dominate the IPO landscape in 2011, according to 74 percent of attorneys surveyed.
All in all, sentiment for next year’s IPO market is highly positive, with 77 percent of those surveyed anticipating a stronger IPO market in 2011.
“Over the course of 2010, the IPO market changed significantly. In 2011, we will continue the breathtaking pace of 2010’s fourth quarter,” say Richard Truesdell, partner, Davis Polk & Wardwell. “This is likely driven by the overall improvement in the economy, stabilization of the capital markets and pent up demand for equity offerings.”
While the strict regulatory regimes of the early 2000s that led to Sarbanes-Oxley may have had a profound impact on pre-IPO companies, 81 percent of those surveyed think that the Dodd-Frank bill will have no impact on IPO issuance in 2011.