Offshore IPOs

Taking a non-US based entity public offshore might be an excellent means to solve specific and unique business problems or raise equity for a current subsidiary. A very detailed process, it needs to be handled by only an experienced firm.

Going Offshore for an IPO or an Exchange Listing

Advantages:

• Raise Capital
• Exit Strategy
• Raise Corporate Profile – “Big Fish in a Smaller Pond”
• Lower Entry Requirements

Taking advantage of international markets and their potential discrepancies have become commonplace with trading practices geared towards financial arbitrage. More information than can be disseminated is now available via the internet and with 24 hours of trading each day opportunities abound. Those who can dissect this overload of information and match deals that capitalize on price differences between two or more markets may find risk-free profit at zero cost.

Business owners can also find advantage by going overseas. Entrepreneurs seeking to either raise capital or create an exist strategy can take advantage of foreign market differences via an overseas IPO or exchange listing. Cross-border trading frequently offers lower initial costs and capital requirements compared to domestic alternatives. As with any business endeavor there will likely be hurdles but the lower entry requirements may make it worth while.

We listed some of the advantages above so conversely here are some of the potential disadvantages:

Potential Disadvantages:

• Currency – Foreign currencies can fluctuate affecting the value of you company’s equity.
• Thin Float – Smaller overseas exchanges often have a fewer number of tradable shares on a daily basis. This could provide an overexposure to market risk.
• Language Barriers – Unless you are fluent in a specific second language you would likely want a market where English is commonly used. This does eliminate a number of alternatives.

Jurisdictions of Preference:

The premier location for a foreign IPO or listing remains the Frankfurt Exchange in Germany. More than 3,400 US companies are currently listed here. The Frankfurt Exchange remains one of the world’s leading trading centers and is the largest of Germany’s seven stock exchanges. As of February 14, 2011, fresh capital requirements were instituted by the exchange which now requires a market capitalization of 500,000 Euros for a new listing. This is still, however, considerable under other markets that may not offer as many advantages. Other interesting alternatives include: 1) Vienna – minimum cap of 5 million Euros and 3 years of operation. 2) Luxembourg – minimum cap of 1 million Euros and 3 years of operation. 3) Baltic NASDAQ – minimum cap of 4 million Euros and 3 years of operation. This exchange is owned by NASDAQ OMX which also operates the alternative marketplaces of First North Baltic and the Nordic Exchange. Finally, if the Emerald Isle is of interest then the Irish Stock Exchange has two different options. The Irish Stock Exchange operates two different markets for equity securities which include the Main Securities Market (MSM) which is primarily for more established companies and the Enterprise Securities Market (ESM) for equity securities of small to medium-sized growth companies.

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