Chicago, IL – According to a new study by BDO USA, LLP, one of the nation’s leading accounting and consulting organizations, just over a third (36%) of capital markets executives at leading investment banks believe the percentage of foreign-based IPOs on U.S. exchanges will increase in the coming year. A similar amount (37%) believe the percentage will remain flat and approximately one quarter (27%) predict a decrease in foreign-based offerings. The percentage predicting an increase is a major drop from 2011 (59%) and 2010 (51%), when a majority of bankers predicted more foreign offerings on U.S. exchanges. Asia is still the most often cited (49%) geographic location for spawning foreign-based IPOs on U.S. exchanges, but not as popular as in 2011 (66%) or 2010 (73%). Latin America (24%) was the only other region receiving serious consideration as the 2012 leader for foreign offerings.
Almost half (44%) of the investment bankers predict a decrease in the number of China-based businesses conducting offerings on U.S. exchanges in 2012. When asked a reason for the decrease, more than half (57%) cite the widely publicized accounting scandals at numerous Chinese businesses curbing the U.S. appetite for these offerings, while almost one-third (31%) think Chinese businesses will seek to avoid U.S. regulations. A lesser amount (12%) cite the increased access to capital in Asia Pacific exchanges as the reason.
More than three-quarters (79%) of the investment bankers indicate that the Chinese accounting scandals have led them to increase their due diligence when vetting China-based offerings. When asked where they have expanded their due diligence efforts of potential China-based offerings, a majority (56%) cite internal controls over financial reporting and just under one-quarter (23%) mention increased scrutiny of corporate governance structure. Lesser amounts cite business risks (14%) and product/sales trends (6%).
“As economic concerns spread to virtually every country around the world, it isn’t surprising that the capital markets community is forecasting a more moderate migration of foreign-based IPOs to U.S. exchanges in 2012,” said Lee Graul, a Partner in the Capital Markets Practice of BDO USA. “However, the bankers concerns specific to Chinese offerings is very revealing. The prominent accounting scandals have clearly impacted the U.S. view of Chinese businesses and investment banks are enhancing their risk assessment processes for considering these offerings.”
IPOs on U.S. exchanges represented more than a quarter of total global IPO proceeds in 2011, a considerable increase from 2010. When asked the chief factor driving this trend, the capital markets community identified pricings of large PE backed IPOs on U.S. exchanges (36%), a slowdown in international IPO activity (34%) and foreign businesses listing on U.S. exchanges (30%).
Moving forward, 41 percent of I-bankers believe the U.S. percentage of global proceeds will increase further in 2012, compared to 40 percent that see it remaining relatively flat and 19 percent that predict a decrease in the U.S. share of global IPO proceeds.
In terms of IPOs taking place on foreign exchanges, 39 percent of investment bankers believe Hong Kong will be the most popular in 2012. Euronext (12%) London (12%) and Shanghai (11%) are the only other exchanges receiving double digit support.
The 2012 BDO IPO Outlook survey, conducted in December 2011, examined the opinions of 100 capital markets executives at leading investment banks regarding the market for initial public offerings in the United States in the coming year. The survey was conducted by Market Measurement, Inc., an independent market research consulting firm, whose executive interviewers spoke directly to capital markets executives, using a telephone survey conducted within a scientifically-developed, pure random sample of the nation's leading investment banks.
BDO USA is a valued business advisor to businesses making a public securities offering. The firm works with a wide variety of clients, ranging from multinational Fortune 500 corporations to more entrepreneurial businesses, on a myriad of accounting, tax and other financial issues.
About BDO USA
BDO is the brand name for BDO USA, LLP, a U.S. professional services firm providing assurance, tax, financial advisory and consulting services to a wide range of publicly traded and privately held companies. For more than 100 years, BDO has provided quality service through the active involvement of experienced and committed professionals. The firm serves clients through 41 offices and more than 400 independent alliance firm locations nationwide. As an independent Member Firm of BDO International Limited, BDO serves multi-national clients through a global network of 1,118 offices in 135 countries.
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