Being a public company has many benefits. However, public markets in different countries are not all the same. Markets differ in size, trading volume, government regulation, and many other ways. These differences cause many companies to Dual-list or foreign-list their shares to take advantage of alternative markets. While companies can list on most major exchanges if they meet the regulatory requirements, this article addresses only foreign companies (non-US companies) listing their shares on US exchanges.
If you are interested in taking your foreign company public in the US, there are many factors to consider. Discover what you need to know before going public in the US and how working with an international business lawyer can streamline the process.
Considerations for Foreign Companies Considering Going Public in the US
Below are the top factors that may influence a foreign company to list in the US.
Capital is the main reason that companies decide to list in the US. The US has the two largest stock exchanges in the world by market cap, the New York Stock Exchange (NYSE) and the NASDAQ. When foreign companies list in the US, they are listing on an exchange that can be four or five times the size of their native country’s exchange. The amount of capital these companies gain access to can be significant.
Liquidity is also a very important reason that companies list in the US. The NYSE is not only the largest exchange by market cap but also by monthly trading volume with a trading volume of over $1,500 billion. The NASDAQ is also very large and has a trading volume of over $1,000 billion. To compare, the London Stock Exchange (LSE) and the Shanghai Stock Exchange (SSE) have trading volumes of about $240 billion and $900 billion, respectively. Therefore, companies can increase their liquidity if their shares are traded on US markets.
The NYSE and NASDAQ are viewed by many as the home for established, respected, and successful companies. Several of the world’s largest and most trusted companies trade on US exchanges. The success of these companies can provide a credibility boost to other companies on the same exchanges whether they deserve it or not.
In the US, we may not see the process of listing on the NYSE or NASDAQ as easy, but some foreign exchanges have even stricter rules and regulations. China, for example, is known for having incredibly strict listing requirements and overbearing regulations once companies are public. This has led some of China’s largest companies to list in the US.
Foreign companies that wish to go public on the NYSE or NASDAQ must follow many of the same rules as US-based companies; however, they are allowed certain exceptions. For instance, they are not required to report quarterly or receive shareholder approval for stock issuances.
Foreign Private Issuers
A foreign private issuer is a business or company registered outside the US and meets certain Securities and Exchange Commission (SEC) requirements. The SEC regulations include several tests that the foreign company must meet to be considered a foreign private issuer. A foreign company must have 50% or less of its voting securities held by US residents and be incorporated outside the US. Additionally, to be considered a foreign private issuer:
- The directors or executives cannot be US citizens or residents
- The company cannot have more than 50% of its assets in the US
- The company cannot administer business operations in the US
Financial Reporting Methods
If your foreign company qualifies as a foreign private issuer, you can choose which financial reporting option is best for you. You can use the US-based Generally Accepted Accounting Principles (GAAP), your home country’s GAAP, or the International Financial Reporting Standards (IFRS). It is helpful to enlist the service of a transatlantic tax attorney who can advise you on the best reporting method to use.
How Can Foreign Companies Go Public in the US?
When it’s time for you to take your foreign company public, you will complete a public offering with the SEC. However, it is essential to consult with an international business lawyer specializing in asset management and regulatory enforcement before doing so. It is an excellent idea to develop a long-term plan before making your filing and taking your company public.
Go Public With the Help of an International Corporate Law Firm
Working with the international team of business, corporate, and tax attorneys at Rooney Nimmo can help you strategically take your foreign company public in the US. We can ensure you choose the best reporting method and meet all the requirements for going public in the US. Contact our firm or call us at (212) 545-8022 to learn more.