Foreign-based IPOs on U.S. exchanges to face more scrutiny: BDO survey


Submitted by BDO USA LLP

With Asian accounting scandals putting off some investors, fewer experts are predicting  foreign-based initial public offerings  will pick up   in the coming year than in previous years, according to a survey by BDO USA, a leading accounting and consulting organization.

About one-third of  capital markets executives at leading investment banks  said the percentage  of foreign-based IPOs on U.S. exchanges  will increase in the coming year, down from 59 percent who said the same in 2011, according to a new BDO USA  study. About  37 percent said the percentage of foreign-based IPOs will remain flat, while 27 percent predicted a decrease in foreign-based offerings.

Interest in Asian offerings  cools

When asked what region would spawn the most foreign-based IPOs on U.S. exchanges in 2012, half of respondents cited Asia, followed by 24 percent who pointed to Latin America. Yet 44 percent of the investment bankers surveyed predicted a decrease in the number of China-based businesses conducting offerings on U.S. exchanges in 2012. About 57 percent of respondents said the widely publicized accounting scandals at numerous Chinese businesses might curb the U.S. appetite for these offerings, while 31 percent said Chinese businesses will seek to avoid U.S. regulations. About 12 percent cited increased access to capital in Asia-Pacific exchanges as  a factor.

About eight out of 10  investment bankers indicated that the Chinese accounting scandals have led them to increase their due diligence when vetting China-based offerings. More than half said they have increased their due diligence of internal controls over financial reporting, while 23 percent said they had boosted their scrutiny of corporate governance structures. About 14 percent cited business risks, and 6 percent cited product and sales trends as areas receiving more attention.

Economic concerns spread

As economic concerns spread to virtually every country around the world, it isn t surprising that the capital markets community is forecasting a more moderate migration of foreign-based IPOs to U.S. exchanges in 2012, said Lee Graul, a partner in BDO USA’s capital markets practice. However, the bankers’ concerns specific to Chinese offerings is very revealing.  The prominent accounting scandals have clearly impacted the U.S. view of Chinese businesses, and investment banks are enhancing their risk assessment processes for considering these offerings.

IPOs on U.S. exchanges represented more than one-fourth of total global IPO proceeds in 2011, a considerable increase from 2010. When asked the chief factor driving this trend, 36 percent of respondents cited the pricings of large private-equity backed IPOs on U.S. exchanges, 34 percent cited a slowdown in international IPO activity, and 30 percent pointed to foreign businesses listing on U.S. exchanges.

United States’ global share to increase

Moving forward, 41 percent of investment bankers said they believe the United States’  percentage of global proceeds will increase further in 2012, compared with 40 percent who see it remaining relatively flat and 19 percent who predict the United States’  share of global IPO proceeds will decrease.

The study also indicated 39 percent of investment bankers believe Hong Kong will be the most popular foreign exchange for IPOs, followed by 12 percent who named Euronext, 12 percent who cited London and 11 percent who selected Shanghai.

The 2012  BDO IPO Outlook  survey, conducted in December 2011, examined the opinions of 100 capital markets executives at leading investment banks regarding the market for initial public offerings in the United States in the coming year. The survey was conducted by Market Measurement Inc., an independent market research consulting firm, whose executive interviewers spoke directly to capital markets executives using a telephone survey conducted with a   random sample of the nation’s leading investment banks.


BDO is the brand name for BDO USA LLP, a U.S. professional services firm providing assurance, tax, financial advisory and consulting services to a wide range of publicly traded and privately held companies. The firm serves clients through 41 offices and more than 400 independent alliance firm locations nationwide. As an independent member firm of BDO International Ltd., BDO serves multinational clients through a global network of 1,118 offices in 135 countries. For more information, visit

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