Will the Cross-Border IPO Trend Continue?

According to EY’s US IPO Pipeline Analysis, the third quarter of 2014 saw 62 IPOs that raised approximately $41.7 billion. This staggering number is far greater than any other nation. What’s more, 70% of the third quarter IPOs from the technology sector were from foreign issuers.

To understand more about what is driving this trend in our markets along with the increasing nature of technology companies crossing into our borders to list on US exchanges I sat down with Fran Addante of the Rubicon Project and Jackie Kelley, EY Global IPO Leader. Below is a brief excerpt from that video interview:

Dr. Woody: Jackie, what is driving record IPOs, particularly this year?

Jackie Kelley: “This year is going to be a record year. We are on track for 300 IPOs… What’s driving that is the fact that we have had low volatility, we have had really strong performance overall in the equity markets, and the fact that IPOs are having great returns, they are really having great returns. Valuation gaps have closed between the investors and the sellers and so IPOs are very, very popular right now.”

Dr. Woody: Fran, we saw a record IPO with Alibaba this year. What do you think it is that is driving the value of these companies?

Fran Addante: “If you are comparing this to early 2000 or so, the bar to be a public company these days is so much higher because of increased regulations, the increase in disruptive technology, and the requirement for a company to really stand out and be clearly compelling amongst all the other high growth companies that exist in the market today. I think the bar is just simply higher.”

Dr. Woody: What is driving companies like Alibaba to want to cross our border and list on our markets?

Jackie Kelley: “The US is by far the most attractive market as it relates to cross-border listings. So, of all the companies out there that list abroad--and generally speaking on average 90% of companies list at home, so you are talking about 10% of companies that evaluate their options—with that said, of those ones that are evaluating their options the preferred markets are the US. I think it goes back to the fundamentals: We have generally very stable markets and our valuations are really strong. And, we are very attractive especially to technology companies.

Dr. Woody: Do you think this trend is going to continue?

Jackie Kelley: I think absolutely and especially here in the near-term as the US still continues to be the dominant market as it relates the global capital markets.

To learn more about Fran and Jackie’s thoughts on the stresses and strains of going through the IPO process you can click here to watch the complete interview.