IPOs Raise More Capital In Mid-Sized Markets Than The USA


Thursday, November 03, 2016 9.45AM / News

New research from Professor Alex Frino has confirmed Initial Public Offerings made in mid-sized markets can raise more capital than they could in the U.S.

The latest research rounds out a three-year research program looking at IPO potential in various markets vs the world’s deepest and most liquid market, the US. The research investigated IPO performance in Australia, Hong Kong, Singapore and Dubai markets respective to underpricing. In all cases, underpricing was 6-14% lower in the smaller markets.

“Even after controlling for differences among a large number of variables known to influence underpricing, including deal size and issue price setting mechanism, we found that underpricing is on average 6-14% lower in smaller markets,” said Prof. Frino. “That means company listing prices are 6-14% higher than they would be in the U.S.”

Professor Frino said the studies taken as a whole highlighted the importance of international businesses considering mid-cap markets when planning to list.

“The US is still the marquee market for companies to list, but our research suggests there may be value in considering alternative bourses more carefully,” he said. “the ‘glamour factor’ of listing on a US exchange clearly comes at a cost, and companies need to think about whether the trade-offs .”

Professor Frino said for companies below the S&P 500 cutoff were likely better off listing on their home or smaller exchanges. “In the US, anything smaller than the Bay threshold will struggle to get the right level of interest,” he said. “Whereas in Australia, Singapore, HK or UAE those same companies are large-cap, attracting more attention and better pricing.”

The results of the research also highlight the intensively competition among investment banks and their customers for small and medium listings in Australia, Singapore, HK and the UAE relative to the USA, said Professor Frino. “This is another factor in why listings in these jurisdictions are able to raise more capital.”

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