IPOs: China to be Major Player in 2011

IPOs: China to be Major Player in 2011-Image by Getty Images via @daylife

The United States is losing its position as the global leader for IPO’s, according to a new survey of American transaction attorneys conducted by KCSA Strategic Communications, a leading integrated communications firm, specializing in financial public and investor relations and creative marketing services.

KCSA conducted an in-depth survey of approximately 50 securities attorneys whose firms advised on 75 percent of the initial public offerings listed on major U.S. exchanges in 2010.  According to the results of the independent survey, 71 percent of securities attorneys think the U.S. is losing its share of global IPOs.

“The simple fact is that as the U.S. regulatory environment has become more restrictive, other global exchanges have become more sophisticated and liquid and therefore have gained market share,” said Joshua Ford Bonnie, Partner, Simpson Thacher & Bartlett. “Given the difficulties of listing in the U.S., more foreign companies are choosing to list on their home exchange.”

“This data confirms that as transaction activity continues to erase geographic boundaries, it is imperative that companies take into account the various audiences with whom they communicate,” noted Jeff Corbin, CEO of KCSA Strategic Communications. “Regardless of where investors are located, here in the U.S. or overseas, clear communications transcends language barriers and helps companies achieve a fair valuation.”

Despite the U.S.’s declining share of global IPOs, the survey respondents unanimously agree that China will be a strong driver of U.S.-based IPO issuance in 2011.  “We expect that Chinese companies will, at least in the near-term, continue to list on U.S. exchanges due to the more clearly defined listing rules and regulations and the perceived stability and prestige of the U.S. markets,” commented Colin Diamond, Partner, White & Case.

In addition, the attorneys surveyed expect increased IPO issuance from other foreign countries.  When asked which foreign countries will drive global IPO issuance, 37 percent of respondents said Brazil and 30 percent said India.

Private Equity backed companies are also expected to dominate the IPO landscape in 2011, according to 74 percent of attorneys surveyed.

All in all, sentiment for next year’s IPO market is highly positive, with 77 percent of those surveyed anticipating a stronger IPO market in 2011. “Over the course of 2010, the IPO market changed significantly. In 2011, we will continue the breathtaking pace of 2010’s fourth quarter,” commented Richard Truesdell, Partner, Davis Polk & Wardwell. “This is likely driven by the overall improvement in the economy, stabilization of the capital markets and pent up demand for equity offerings.”

While the strict regulatory regimes of the early 2000s that led to Sarbanes-Oxley may have had a profound impact on pre-IPO companies, 81 percent of those surveyed think that the Dodd-Frank bill will have no impact on IPO issuance in 2011.

“There is a significant number of companies that are preparing to go public, should go public and most likely will go public in the U.S. markets regardless of increased regulatory requirements,” said Michael Littenberg, Partner, Schulte Roth & Zabel. “These are in many cases high quality companies that are at the point in their life cycle where being public makes sense.”

Other key findings from the survey include:

What are the factors leading to improvement in the IPO market?

a. Better Valuations: 11%

b. Good Market Performance: 18%

c. Increased Demand: 29%

d. Investor Confidence: 20%

e. Strong Pipeline: 22%

What industries are driving IPO issuance?

a. Consumer/Retail: 11%

b. Financial Services: 7%

c. Green Tech: 6%

d. Internet: 10%

e. Life Sciences: 20%

f. Natural Resources: 10%

g. Technology: 28%

h. Other: 9%

For more information on KCSA Strategic Communications or the 2011 IPO Outlook Survey, visit us at www.kcsa.com or contact Sharron Silvers, ssilvers@kcsa.com.

About KCSA Strategic Communications

Founded in 1969, KCSA Strategic Communications (www.kcsa.com) is the only independent corporate communications firm in the nation that seamlessly integrates investor relations, public relations and creative marketing services. The firm’s customized programs and strategic counsel create communications solutions for public and private companies allowing them to effectively reach their desired audiences and achieve their business goals.

CONTACT: Sharron Silvers / Chi-Chi Millaway
KCSA Strategic Communications
(212) 896-1282 / (212) 896-1269
ssilvers@kcsa.com / cmillaway@kcsa.com

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