Can a Business in Another Country Be Listed on Nyse

Intro

Being a public company has many benefits. Still, public markets in different countries are not withal. Markets differ in size, trading volume, government regulation, and many other ways. These differences cause many companies to cantankerous-list or foreign-list their shares to take advantage of culling markets. While companies can listing on well-nigh major exchanges if they run into the regulatory requirements, this article addresses only foreign companies (not-U.s.a. companies) listing their shares on Us ("US") exchanges.

Why list in the Usa?

Capital

Capital is the chief reason that companies decide to list in the US. The Us has the two largest stock exchanges in the earth by market cap, the New York Stock Commutation (NYSE) at over $20 trillion and the NASDAQ at over $x trillion. When foreign companies list in the US, more than often than not, they are listing on an exchange that is four or 5 times the size of their native country'due south exchange. The corporeality of uppercase these companies gain admission to can be significant. For case, Alibaba, a Chinese company, issued shares on the NYSE in 2014. The NYSE is more than five times larger than both the Shanghai Stock Exchange (SSE) and the Hong Kong Substitution (HKEX). The SSE and HKEX are the quaternary and fifth largest exchanges in the world, respectively, each having market place cap of $4-v trillion. A comprehensive list of stock exchanges and their market caps can be institute here.

Liquidity

Liquidity is as well a very of import reason that companies list in the The states. The NYSE is non only the largest exchange by market place cap but also by monthly trading volume with a trading volume of over $1,500 billion. The NASDAQ is also very big and has a trading volume of over $one,000 billion. To compare, the London Stock Exchange (LSE) and the SSE have trading volumes of virtually $240 billion and $900 billion, respectively. Therefore, companies can increment their liquidity if their shares are traded on United states markets. An example of this is Imperial Dutch Shell, commonly known as Vanquish. Shell is incorporated in the Uk and trades on both the LSE ($39.4 billion) and the NYSE ($250 meg). While most of Shell's shares are traded in the LSE, the NYSE provides Beat more liquidity because of its college trading volume.

List in the US creates a liquidity advantage in some other way beyond trading volume. Companies that list in the US may lengthen the amount of time during which their stock can be traded each day. All major stock exchanges trade for a certain amount of fourth dimension each twenty-four hour period. The NYSE, for example, is open up from 9:30 AM to 4:00 PM ET each day, while the SSE is open from nine:thirty AM to 3:00 PM CST. Though some exchanges offer after-hours trading, most exchanges limit trading to a ready number of primary hours. If a company is cross-listed on the SSE and the NYSE, considering of the 12-hour time difference when trading stops at 3:00 PM in Shanghai y'all merely need to wait vii.5 hours until your shares brainstorm trading on the NYSE as opposed to waiting 18.v hours for trading to begin again in Shanghai.

Credibility

The NYSE and NASDAQ are viewed by many as the domicile for established, respected, and successful companies. Several of the world'due south largest and most trusted companies trade on U.s.a. exchanges. The success of these companies can provide a credibility boost to other companies on the same exchanges whether they deserve it or not. The increase in credibility and recognition tin can be especially truthful for companies coming from lesser-known exchanges or from smaller strange countries that don't typically produce internationally successful and trusted companies. Getting listed on a big US exchange tin can make a big difference for these companies.

Companies that listing on a The states substitution may also have more credibility considering the listing standards of US exchanges are relatively loftier compared to other exchanges. Listing on a U.s. commutation also exposes foreign companies to US courts. In other words, a strange company that lists in the US tin can be sued by shareholders in U.s.a. courts according to the US securities laws. Thus, typically merely quality companies that meet a rigorous gear up of listing standards will list on a The states exchange.

Ease

In the U.s., we may non come across the process of listing on the NYSE or NASDAQ as easy, but some foreign exchanges have fifty-fifty more strict rules and regulations. China, for example, is known for having incredibly strict list requirements and overbearing regulations once companies are public. This has led some of China'south largest companies to list in the United states. Baidu has get one of the about successful companies to come out of China, simply when it was ready to go public, it could not meet China's requirements. In social club to list on the Chinese Small and Medium Cap Market, a company's profits must reach over well-nigh $5 one thousand thousand in the iii years leading upwardly to an IPO ^ane . Baidu had only $300,000 of turn a profit in the quarter prior to its IPO. In improver to the turn a profit requirements in China, countless regulations around IPOs or fifty-fifty secondary offerings can cause the process to have longer than it does in the U.s.a..

Foreign Issuer Listing Requirements

In general, foreign issuers that list on the NYSE or NASDAQ follow the same rules and regulations equally The states companies, simply there are certain exceptions for companies that authorize as foreign individual issuers (the process of qualifying every bit a foreign private issuer will exist discussed later in this article). Some of the more pregnant regulations are listed below.

The following regulations utilise to U.s.-based public companies but non strange issuers:

• Written report on a quarterly footing. Unlike domestic filers that accept ten-G and ten-Q filings, international companies file their annual report as a 20-F, and acting notices (minimum frequency is set by habitation country requirements) are submitted, similar any press release, on a Grade 6-1000.
• Accept a bulk independent lath. The independence exam is focused on the Audit Commission, and the Inspect Committee tin consist of one person for an international visitor.
• Have a compensation or nominating commission. The but commission required for an international visitor is the Audit Commission.
• Receive shareholder approval for disinterestedness compensation or other stock issuances.

Additionally, strange issuers may cull to do the following:

• Apply IFRS (in its original IASB version) instead of The states GAAP. While not an selection (yet) for US Companies, dominion changes passed in 2007 enable international companies to use IFRS reporting language in their filings.
• Follow home country corporate governance practices. Numerous corporate governance requirements adhered to by United states of america companies are not required for foreign private issuers. Among the most notable, United states of america proxy rules exercise not apply to international companies. For the proxy procedure, international companies are only required to solicit proxies from their US holders. In doing so, they exercise not need to use a proxy statement compliant with United states of america rules.
• List ADRs ² or Common Shares (same requirements). A strange individual issuer (whether information technology is a dual listing or a single listing) is not limited to using only ADRs.

The regulations surrounding foreign individual issuers ("strange issuers") can exist very advantageous even to the bespeak where some U.s. companies complain about foreign issuers having such loose standards (e.m., using IFRS rather than GAAP or not having to report quarterly). A visitor could save millions of dollars and thousands of hours if they authorize to be a foreign private issuer and are allowed to apply local accounting standards or governance practices. While list in a foreign land tin can exist a difficult procedure, qualifying as a foreign private issuer can significantly lessen the burden.

Foreign Private Issuer

As discussed in this article, many foreign companies listing on Usa exchanges. However, not all these companies are considered strange private issuers. A foreign company must meet sure requirements to be considered a foreign private issuer and be eligible for the relaxed benefits that status brings. To authorize, a strange company must pass either the shareholder test or the business contacts test.

Shareholder Test

To pass the shareholder exam, United states of america residents must hold fifty% or less of a company's voting securities.

"As an initial matter, a strange company must determine whether more than 50% of its outstanding voting securities are held 'of record' past The states residents. For purposes of this test, foreign companies must 'look through' the record ownership of brokers, dealers, banks, or nominees belongings securities for the accounts of their customers, and as well consider any benign buying reports or other information available to the issuer ³ ."

If a company determines that 50% or less of its voting securities are held by US residents, so it qualifies as a foreign private issuer and does not need to consider the business contacts examination. If more than fifty% of a company's voting securities are held by U.s.a. residents, and then the company must consider the business contacts test.

Business organisation Contacts Test

A visitor does not encounter the business contacts test if "(1) the bulk of its executive officers or directors are US citizens or residents, (2) more 50% of the issuer'southward assets are located in the United states, or (3) the issuer's concern is administered principally in the The states ⁴ ." If one of these circumstances applies and more than 50% of the voting securities are held past US residents, so the visitor is not eligible to be a foreign individual issuer.

Foreign Listing Trends

Foreign listings are condign increasingly pop. Equally they go more popular, the impact of foreign listings on U.s. and earth markets expands. The post-obit are significant trends and statistics demonstrating the touch of foreign listings on United states markets:

• The largest IPO in history was the Alibaba group. The Chinese visitor listed on the NYSE in 2014 for $25 billion.
• The number of foreign listings has increased since 2012. During 2012 at that place were 12 cross-border ⁵ IPOs, only since 2012 in that location have been over 20 cross-border IPOs each year. The highest number came in 2014 when at that place were 67 cross-border IPOs.
• During 2022 there were 41 cantankerous-border IPOs, making upwards 24% of the total Usa IPOs.
• 25% of the total gain raised in the U.s.a. during 2022 were cross-border IPOs.
• Five of the largest ten IPOs during the fourth quarter of 2022 were cross-edge IPOs.
• The U.s. was the top destination for foreign IPOs with 41 total in 2022 (22 on the NASDAQ and 19 on the NYSE).
• The country with the most IPOs outside of its home state was Mainland China with 25 outbound IPOs.

Conclusion

The NYSE and NASDAQ are not only for US companies. If you lot are a non-U.s. company thinking nearly an IPO or a foreign listing, then you may want to consider listing in the US. Listing in the US tin can provide many benefits including access to capital and increased liquidity. Additionally, your company may be eligible for foreign private issuer condition which will simplify the process of listing in the US.

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Resources Consulted

• Stock Market Clock: List of Stock Exchanges
• The Coin Project: All of the World's Stock Exchanges past Size
• Earth Federation of Exchanges: Statistics
• Business Insiders: 4 Reasons Chinese Companies IPO in America
• SEC: Accessing the U.S. Capital Markets – A Brief Overview for Strange Private Issuers
• Investopedia: ADR Basics – What is an ADR?
• EY: IPO insights – Comparing global stock exchanges
• Beat: Share Prices

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Footnotes

1. The Red china Stock Exchange – IPO Overview
2. ADR: American Depository Receipts are stocks traded in the US that represent a certain number of shares of a not-US company
3. SEC: Accessing the U.South. Capital Markets — A Brief Overview for Strange Individual Issuers
4. SEC: Accessing the U.S. Upper-case letter Markets — A Brief Overview for Foreign Private Issuers
5. IPOs past non-US companies on The states exchanges

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Source: https://www.ipohub.org/foreign-listings-on-u-s-exchanges/

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