Entering the US Market without Hassle
In the series, the “A Crisis in European Equities,” the Financial Times explores why some of Europe's most promising companies are fleeing to America's capital market. We believe it doesn’t have to be an either-or decision. Here’s why.
Last week the Financial Times ran an article “Flight risk? London listings are the most vulnerable to New York’s allure” as part of their ongoing series, “A Crisis in European Equities,” that stated UK listed companies often trade at a steep discount compared to their US counterparts. In reality, valuations involve numerous factors, some of which are within a company's control while others are not. However, a company looking to attract US investors doesn’t have to choose between a home country listing and a US listing. There is a cost-effective and hassle-free alternative: the OTC Markets.
The OTC offers non-US companies more flexibility with fewer regulatory burdens than the big exchanges. Sidestepping the hefty costs of a primary listing in the US, including high listing fees, compliance expenses, and ongoing regulatory obligations, companies can significantly lighten the financial load and can then put their resources to better use, like fueling their company's growth initiatives.
Less rigorous listing requirements make it easier for companies to qualify which translates into a faster time to market, enabling businesses to access capital more quickly and efficiently. Issuers too, can avoid the strict reporting requirements imposed by US securities laws, such as the Sarbanes-Oxley Act. While OTC listed companies are still subject to regulatory oversight, the OTC offers a more relaxed regulatory environment, reducing the administrative burden.
However, it's worth noting that investors in the US will demand greater clarity, transparency, and communication. Along with these higher expectations, investors still need relevant data and information to make decisions about a company's historical and future operating performance.
Activities such as conferences, meetings and roadshows are vital in cultivating and nurturing a two-way relationship between investors and management. That’s why you need a well-connected US-based team specializing in cross-border Investor Relations to create significant impact. To avoid what James Clear calls the ‘Valley of Disappointment,” cross-listed companies need a robust IR program to stand out in a crowded market. This includes:
1. Strong governance.
2. Quality and timely disclosure—this includes GAAP and non-GAAP information.
3. Ongoing 1-1 dialogue with investors via conferences, meetings, messages and calls.
4. Compelling investment case and investor presentation.
5. Well-organized and up-to-date IR website.
With our extensive network and deep expertise, Harbor Access can help optimize your IR goals in the US market. Reach out to Jonathan Paterson (jonathan.paterson@harbor-access.com) or Graham Farrell (graham.farell@harbor-access.com) to start a conversation.
