IPO Volume Share Outsized US
When it comes to all IPOs on US exchanges this year, it wouldn’t even make the top three. The largest such offerings to date are by companies domiciled outside the US: Viking Holdings Ltd. in Bermuda, Amer Sports Inc. in Finland, and Kazakhstan’s Kaspi.KZ JSC. Non-US issuers accounted for 39% of the $17.2 billion raised among IPOs on US exchanges so far this year, according to data compiled by Bloomberg. That’s the largest share of the volume in more than a decade.
Why Global Companies Choose US Exchanges
Global companies choosing to list in the US instead of their native countries has prompted plenty of hand-wringing at home, such as when UK-based Arm Holdings Plc chose New York last year over London for its $5.2 billion first-time share sale. US exchanges say the decision over where to list often simply boils down to companies getting higher prices for their stock.
US stocks have the highest valuations in the world, according to an article in April by Nasdaq Inc. Chief Economist Phil Mackintosh on the company’s website. The US’s market valuation at the time stood at an average of 20.6 times forward price-to-earnings, higher than Europe’s 12.8 times and the 12.6 times for Asia-Pacific excluding Japan, Mackintosh’s article showed.
Specialized Knowledge and Higher Valuations
If that wasn’t enough, the US market attracts issuers looking for more specialized knowledge of their companies. “European portfolio managers tend to be more generalist, whereas in the US you tend to have a large number of sector-specific investors,” said Michael Harris, global head of capital markets at the New York Stock Exchange. “This level of in-depth analysis within a key industry can often result in a willingness to pay a higher valuation multiple.”
The valuation gap for issuers in the sector is particularly pronounced in certain sectors like energy and materials, which may result from different regions’ approach to ESG, according to Karen Snow, Nasdaq’s global head of listings. Companies “feel that European investors are just more restricted in the type of businesses that they’re willing to invest in at this point,” she said.
Future Prospects for International Issuers
Snow expects the bulk of international issuers will continue to come from Europe and Asia, which account for 61% of the money raised by global issuers listing in the US so far this year. One such potential issuer is Swedish fintech Klarna Bank AB, whose chief executive officer Sebastian Siemiatkowski said earlier this month that the startup is preparing for an IPO that may value the company at as much as $20 billion, and is leaning towards a New York debut. Other international firms set to list in the US include Mexican airline Grupo Aeromexico SAB and Indian-owned aluminum producer Novelis Inc., which traces its roots to a spinoff from a Canadian company and is domiciled in the country.
“It’s a really good mix across all different sectors, which I think is probably one of the most exciting parts of it,” Snow said.
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