The United States is still one of the best countries to market products and services in the world. Its vast borderless size expanding coast to coast, a single currency for transactions and huge 300 million consumer-based economy make it a great free market unlike any other country.
But since 2002, America has been losing its share of foreign listings mainly because of onerous listing requirements and expensive compliance requirements. That’s the word from the Committee on Capital Markets Regulation after conducting a definitive survey on the subject.
The delisting of foreign companies this year in the United States rose to 56 through the end of November from 30 last year – a sizable 87% increase. Ten years ago, that figure was just 12; in the last decade, delistings have surged a cumulative 367%.
The trend to list abroad really gained momentum following the Enron and Worldcom scandals earlier this decade. The SEC subsequently went gangbusters, introducing the complex and mundane Sarbanes-Oxley legislation making it expensive and too burdensome for international companies to list on U.S. exchanges. And many either avoided U.S. listings altogether or delisted and headed to London – a primary beneficiary of lost U.S. business because of less burdensome listing requirements.
To be sure, the United States is still the world’s largest and most liquid stock market.
Despite cumbersome listing requirements and burdensome regulations, many companies still seek a listing on the New York Stock Exchange and view that listing as prestigious. But that’s not the case for smaller companies where London’s AIM or Alternative Investment Market continues to draw a swarm of listings.
In order to make the U.S. an attractive destination for new listings again, especially for smaller companies going public, the government and SEC should work together to scrap or seriously revise current legislation. Otherwise, London, Shanghai, Tokyo and Hong Kong will reap what New York fails to sow.
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