NEW YORK, May 28, 2008 – The Committee on Capital Markets Regulation (“Committee”), has released its competitiveness update for the first quarter of 2008 showing that the U.S. retains a shrinking share of a shrinking market.
The Committee, an independent and nonpartisan research organization dedicated to improving the regulation of U.S. capital markets, said that the historically low market activity in Q1 reflected the impact of turmoil in the credit markets. There were just 25 global IPOs by foreign companies in Q1 2008 valued at $8.3 billion, compared with 335 in 2007 valued at $95.8 billion, the Committee said.
U.S. IPO activity was equally anemic. In Q1, there were just 12 IPOs by U.S. companies, compared with 220 in 2007, the Committee added.
Nonetheless, the continued deterioration of the competitive position of U.S. capital markets is evident, the Committee said.
It added that:
- While some of the 13 measures improved in Q1 2008 since 2007, all measures remain at historically low levels.
- Foreign issuers continue to rely heavily—and, now, almost exclusively—on the private Rule 144A equity market. From 1996 to 2006, 64.1% of global IPOs by foreign companies (by value) in the U.S. were Rule 144A IPOs. By 2007, that figure had increased to 87.9%. In Q1 2008, it was an astounding 95.6%.
- U.S. exchanges are capturing a decreasing share of global IPOs. From 1996 to 2006, 28.7% of IPOs by foreign companies outside their home market (by value) listed on a U.S. exchange. By 2007, that figure had declined to 6.9%. In Q1 2008, it was 1.6%.
- Foreign companies continue to delist from the New York Stock Exchange (“NYSE”). From 1997 to 2006, the foreign delisting rate from the NYSE averaged 5.3%. When in 2007 the rate spiked to 15.1%, some believed this reflected pent-up demand in response to the SEC’s June 2007 easing of deregistration requirements. However, the foreign delisting rate remained high in Q1 2008, at 11.4%, casting substantial doubt on the pent-up demand analysis.
In summary, Q1 data must be read in the context of very low IPO levels due to the market turmoil, the Committee said in its update. However, it added, key measures show a continuing loss of U.S. competitiveness. Without major reforms in shareholder litigation, the regulatory process and shareholder rights, we expect these trends to continue, the Committee concluded.
Beginning with its December 2007 report—“The Competitive Position of the U.S. Public Equity Market,” the Committee has tracked on a quarterly basis 13 separate measures of the competitiveness of U.S. capital markets. These measures fall into five categories: (1) equity raised in public markets; (2) the relative size of the private Rule 144A and public equity markets in the U.S.; (3) cross-listings and delistings by foreign companies; (4) trading on U.S. and non-U.S. stock exchanges; and (5) regional origin of U.S. investment banking revenue. Historical data through Q1 2008 is now available on the Committee’s website at www.capmktsreg.org.
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For Further Information:
Hal Scott
617 384-5364
hscott@law.harvard.edu
Tim Metz
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