Global Equity Market In 1985, Euromoney surveyed several firms that either listed stock on a

Global Equity Market In 1985, Euromoney surveyed several firms that either listed stock on a

foreign stock exchange or had a stock offering in a foreign market to find out why they did so. 6 While the study is now quite old, the results of the survey are still informative.

6 “Why Corporations Gain from Foreign Equity Listings,” Euromoney Corporate Fi- nance (March 1985), pp. 39–40.

SELECTED TOPICS IN FINANCIAL MANAGEMENT

One corporation surveyed was Scott Paper, a U.S. corporation, which listed its stock on the London Stock Exchange in November 1984. The stock had already been listed on the NYSE and a regional stock exchange. The following reason for listing was given by an official in the company’s public relations department:

We had no immediate need for extra equity, but may well do so at some time in the future. We would like a broader stockholder base, and felt there would be some interest in the company overseas. The London Stock Exchange has high visibility, so it best served the purpose of getting the company’s name known. 7

A second firm surveyed was Saatchi & Saatchi, a U.K. corporation that raised equity in the United States in the over-the-counter market. Several reasons were given for Saatchi & Saatchi’s raising of equity in the United States. The firm had considerable U.S. activities and therefore felt it neces- sary to establish a presence in the U.S. equity market and a higher profile in the United States in general. Also, the firm wanted to offer stock options to its U.S. employees and apparently felt that having stocks traded in the U.S. equity market would make the options more attractive to employees.

Yet another set of reasons discussed earlier was given by a third firm in the Euromoney survey, Norsk Data, a Norwegian firm. It is in the high technology industry and before it sought foreign listing had a history of earning per share growth of 60%. In 1981, the firm listed its stock on the London Stock Exchange and followed this several months later with an offering of new shares in London. In 1983 the firm raised funds in the U.S. equity market with the stock traded in the U.S. over-the-counter market. The chief executive officer of the firm gave the following reasons for listing:

For major computer companies, the U.S. market is a very important source of funds, since it is alive to the possibility of high technology. However, we went to London first, since we felt a leap straight from Oslo to New York would

be too great. Our major customers are in Germany, the UK and to a lesser extent, the U.S. 8

In 1984, Norsk Data raised equity funds in a simultaneous United States and European offering. With respect to its various equity offer- ings, the chief executive officer stated:

7 “Why Corporations Gain from Foreign Equity Listings,” p. 39. 8 “Why Corporations Gain from Foreign Equity Listings,” p. 40.

International Financial Management

We have now brought equity up to the level of our com- petitors, and we have a natural balance sheet for a high growth, high technology company. That would have been very difficult if we had been limited to the Oslo stock

market. 9 [Emphasis added.] In addition, after these equity offerings on foreign markets, the firm was

60% owned by foreign investors, most of which was nonvoting com- mon stock. Thus, corporate control was not sacrificed.

A 1992 survey of corporate managers investigating why U.S. corpo- rations list on the London, Frankfurt, and Tokyo stock exchanges found the following four major motives: 10

1. Increased visibility (awareness, name recognition, or exposure).

2. Broadened shareholder base (diversify ownership).

3. Increased access to financial markets.

4. Possible future market for products. The most popular motive was the first.