Submitted by PricewaterhouseCoopers
Emerging market activity in public offerings has increased during the past seven years, according to PricewaterhouseCooper’s report, Capital Markets in 2025, The Future of Equity Capital Markets. About 55 percent of 2011 year-to-date global IPO listing volume took place on exchanges located in emerging markets, a significant increase from less than 25 percent in 2004.
Despite a relative decrease in the number of foreign issuers in the U.S. in recent quarters, we have seen a considerable increase in the number of companies listing outside their home country, said Howard Friedman, a PwC partner specializing in IPO execution.
As emerging economies in the East continue to grow and established companies in the West look to tap new markets for growth, we expect that emerging market exchanges will see an increase in both the number of locally headquartered IPO registrants as well as the number of foreign filers, including U.K.-based, European or U.S. companies who are filing outside their home country, Friedman said.
While emerging market exchanges are expected to see the majority of the projected growth, PwC believes global interest will continue in the NYSE and NASDAQ as they continue to be recognized as blue-chip exchanges that convey prestige. It’s widely held that the overall oversight surrounding a U.S. listing includes high demands around corporate governance. In addition to the comparative depth, knowledge and trust in U.S.-exchange-traded equities, a U.S. listing has branding and other profile benefits that provide a solid foundation for companies in emerging economies. As global equity issuance recovers to pre-recession levels, U.S. exchanges will continue to obtain quality listings from around the world.
Included in the report are the results of a survey in which executives were asked which foreign exchanges beyond their home exchange would issuers consider when planning an IPO. Surveyed executives confirmed that if they were not to plan an IPO in their home market, they would chose the mature markets of New York and London, with 74 percent and 72 percent naming those cities’ exchanges respectively. When asked what foreign exchange they would consider in the year 2025, executives indicated China (55 percent), New York (39 percent), India (38 percent) and London (29 percent).
While listing in a high-growth emerging economy might include increased local brand awareness and customer engagement, it also might involve reduced access to banking and legal resources, currency issues, time and language differences and different regulatory environments.
When determining where to file an IPO, companies need to properly assess the benefits of each market, including access to investors and understanding the ongoing commitments to the regulatory requirements specific to each exchange. The road to executing a successful IPO demands that companies carefully weigh each choice available before deciding which market best fits the company short- and long-term goals.
PwC US IPO Watch is a quarterly and annual survey of IPOs listed on U.S. stock exchanges. These include IPOs by domestic and foreign companies, best-efforts, business development companies, filings with the FDIC, and bank demutualizations. IPOs do not include unit investment trusts and fully classified closed-end funds.