Exchange Shopping

European stock exchanges may be aggressively marketing to foreign corporates. But U.S. companies need a good business reason to list overseas.

In the meantime, though, the LSE is trying to bring the world to itself by going straight to international companies that are looking to list, with the U.S. market a top priority. Boasting that “almost twice as much international trading [is] reported by firms in London than on Nasdaq, [the] NYSE, Euronext, and the Deutsche Boerse combined,” the LSE has run two marketing tours in the United States so far, and is planning up to five more by next March. “Up until the end of last year, we were quite reactive. We’ve now actually hired people to go out and see if there are U.S. companies that would be interested in a secondary listing,” says Charlotte Crosswell, head of North American business development for the LSE.

At press time, the LSE was in talks with between 20 and 30 American companies, mostly in the health-care and oil-and-gas sectors. It currently counts 8 U.S. companies on its small-cap Alternative Investment Market (5 of which have listed this year) and 53 on its main exchange.

Why such interest? “Sometimes it’s just a stamp of approval, to be able to say, ‘We’re listed in euros,’” says Crosswell. But “some companies are saying, ‘We’re not raising all the money we want to in the U.S.,’ and many of them are simply wanting to widen their shareholder base, since they are deriving more of their revenues from Europe.”

Reasons for Listing

Indeed, those are the classic reasons any American company would want to consider dual listing. And the bigger and more liquid foreign exchanges get, the more critical it is for U.S. companies to look outside New York, says O’Hara. Now that the exchanges “are more competitive,” she says, “where to list becomes a strategic issue for U.S. companies. They have to decide: ‘Who do we want our investors to be, and how do we make our stock more attractive to them?’”

Experts caution that there also needs to be a sound business reason. “The first question any investor will ask is: ‘Why can’t they raise the money in their home market?’” says Grant Thornton’s Beaney. “You have to have a good story, like trying to sell in an overseas market or having an investor base that’s already there.”

With international revenue growth tripling to make up more than one-third of its total revenues, $88 million Marlboro, Massachusetts-based Concord Communications is a typical candidate for dual listing. Like WWE’s Liguori, Concord CFO Melissa Cruz has been weighing a listing in Frankfurt or London for the past several years. “The positive driver is that you get more local news coverage in Europe,” she says, and garner interest from European domestic funds, rather than just funds that invest globally.

And in the wake of so many cross-Atlantic mergers, many see cross-listing as a natural step toward making existing foreign shareholders feel more comfortable, as Clean Diesel Technologies Inc. CFO David Whitwell did when he completed a $5 million offering on the LSE’s small-cap Alternative Investment Market last December. A spin-out from Netherlands-based Fuel Tech NV, the $1.6 million Stamford, Connecticut-based company had most of its shareholders in the United Kingdom–where they were unable to easily trade on the U.S. over-the-counter market, on which Clean Diesel had listed in 1996. “When it came time to raise funds again,” says Whitwell, “our investors asked us if we would move closer to them.”


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