Wednesday, October 14, 2009

40% of European Companies Abandon NYSE

Agencia Estado reports that since the outbreak of the financial crisis more than 40% of European companies that trade on U.S. exchanges have left the largest financial market in the United States, the New York Stock Exchange (NYSE).

European companies complain about the high cost to trade in New York and excessive bureaucracy to prove the transparency of transactions. Since 2007, companies like Allianz, BASF, E. ON, Vivendi, Lafarge, Suez and GDF Fiat returned to their home markets, London, Paris, Milan and Frankfurt. The withdrawal began in April 2007 and coincided with two factors: the worsening of the subprime crisis and reform of financial accounting standards, which among other things facilitated the withdrawal of foreign companies.

Since then, players like Danone, British Airways, Adecco and Telekom Austria have abandoned the U.S. market, opting to trade their securities closer to their headquarters. The last major group to announce their departure was a German insurance company Allianz. "When we first joined the NYSE in 2000, wanted to have international visibility and attract the attention of new investors," said a spokesman for the company in Le Monde. "But things have changed, and 95% of our shares are traded on the German market. Frankfurt is our place." The company also trades in Milan, London, Paris and Zurich.

French advertising group Publicis made a similar decision as the cost of maintaining the U.S. exchange was not worth it; only 1% of their securities transactions were made in the U.S..

Other notables: Sergio Marchionne, CEO of Fiat; Marcus Schenk, chief financial officer of German utility E. ON

Between 2000 and 2007, the number of European companies that trade stocks on the NYSE had risen 4%. Since then, the European presence has fallen 40%. The explanation of the phenomenon can be found in the early '90s, in the Nasdaq. With the outbreak of the crisis of the dot Com companies in 2000, 34% of companies outside the United States withdrew their names from the list of offerings in New York.

Coincidence or not, the rout experienced by the NYSE comes amid a succession of crises and scandals: subprime, Lehman Brothers and Madoff are three examples. In contrast, 71 new companies accented foreigner settled in the London Stock Exchange (LSE) between 2006 and 2007.

Three researchers at the University of Toronto, Craig Dodge, Andrew Karolyi and Rene Schultz wrote a study on the subject. They state that the decline in the number of companies has more to do with acquisitions, mergers, restructurings and bankruptcies. The fact is that while the NYSE loses European companies, but wins Chinese and Latin American, European markets are preparing for a resumption of new businesses, possibly in the first quarter of 2010. Companies like Polarcus Norwegian, Dutch Delta Lloyd and the German Germany2 and Unity Media has announced the opening of capital in the bourses of the European bloc.

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1 comment:

Paul said...

Thanks for the useful info. This is not the type of info one finds in US media these day. Especially with all that DJIA at 10k talk today.

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