Public Offering at Global Level 

 International public offerings are critical for obtaining an increase in demand for shares, in trading volume and share liquidity. At the same time they have a vital role also in a company’s entering the global arena. Such developments bring media attention along with, while the recognition of the company and company’s products in international arena also rises. Attention of institutional investors coming from international markets is one of the advantages this approach offers. On the other hand, companies’ operating outside their home country is positively reflected in corporate governance and transparency. Decrease in quotation fees necessitated by competition is another advantage of choosing different stock markets. In order to exploit the advantages offered by globalization, companies have to take certain steps as well. Because there are specific rules for benefiting from the advantages mentioned above. Public offering in another country requires a company to comply with that country’s regulations. Although every country chooses a structure in accordance with its economic policies, in general these regulations contain compelling conditions for companies. 

America and England Compete for Public Offerings

International public offerings began to increase beginning in mid-1980 along with changing circumstances. In that period, most of those companies which preferred international public offering were of European origin. Among the countries preferred for public offerings, America came first. Being traded at U.S. stock markets was considered to be prestigious for companies. Between 1980 and mid-1990, there was a great increase in the number of European companies which realized international public offerings. While the number of European companies listed on American stock markets has steadily increased, there was not a similar situation at European stock markets.

In 1998, the share of New York Stock Exchange (NYSE), American Stock Exchange (AMEX) and NASDAQ in international public offerings was 31%, while that of London Stock Exchange and Alternative Investment Market (AIM) was 16%. Total number of companies resorting to international public offering in that year was 2,978. However, America’s predominance in international public offerings started to stagger in recent years. The most important reason for that is considered as the famous Sarbanes-Oxley Act which was introduced in the U.S. after the corporate scandals. Passed into law in 2002, this act makes regulatory compliance in the U.S. much more time-consuming and expensive bringing additional burdens to companies and managers. As a result, it was not welcome by companies. Since compliance with the Sarbanes-Oxley Act has considerably increased the cost of initial public offerings in the U.S., this country has begun to lose its position as the primary choice of companies. It is possible to observe the effects of the race between New York and London for becoming a global finance center also in the issue of public offerings. It is generally thought that New York has had difficulty in competing with London in recent periods. But there are some who do not share this view.

The basis of their argument refers to the change in the structure of companies going public. Because, while the number of foreign companies listed on the main market in London has not increased much, those listed on the Alternative Investment Market (AIM), the junior stock market of the London Stock Exchange, has considerably increased. Although there were only two foreign companies listed on that market when it was founded in 1995, this number rose to 220 in 2005. Companies listed on the AIM are mostly small scale. It is claimed that these companies will not get listed on American stock markets neither now nor in the future. The reason is a great part of companies listed on American stock markets are large scale ones. The argument is that the difficulty of getting noticed among so many giants and competing with them makes London Stock Exchange more attractive for small companies. 

The Forms of Public Offerings in America and London

Different forms of public offering are available for foreign companies in America and London. In America, companies can get listed on the stock exchange in a system named Rule 144A. Apart from that, in order for a company’s shares to get traded on either over-the-counter or organized markets some conditions should be met. According to the Rule 144A, companies going public whose shares are to be traded at over-the-counter market are exempt from SEC (Securities and Exchange Commission) registration and various compulsory declarations. However, these companies face again at least some obligations. Companies applying for trading at organized markets have to register with the SEC and comply with the regulations of American capital markets. Financial reporting standards, declaration conditions, restrictions on majority shareholder status, corporate governance practices are among the main conditions to be met by these companies. The Sarbanes-Oxley Act was designed to expand these regulations.

 As for London, the capital city of Great Britain and one of the most important global centers, company shares can be traded at the main market as depository certificates or issued as ordinary shares. Initial public offering is possible at the AIM, too. When issuing ordinary shares, companies have to register with the Quotation Authority first and receive the permission to be traded at the London Stock Exchange. But London is not as particular as the U.S. with respect to regulations that companies have to comply with. Financial information on the company should be prepared according to the regulations in America, England or the International Accounting Standards. But there are exceptions also to that condition. Companies whose shares are traded as depository certificates do not have to comply with these regulations. Requirements for public offering at the Alternative Investment Markets are, however, quite few. 

Emerging Markets on Rise

As in many other areas in recent years, developing countries have started to make their effects felt also in public offerings. According to Financial Times, two out of every five public offerings in the world were carried out by the so-called BRIC countries; namely Brazil, Russia, India and China. While the share of these countries in public offerings was 32% in 2006, that rate increased to 39% in 2007. In 2007, the amount of public offerings carried out by only China rose 117.7 billion dollars. But that figure was 86.5 billion dollars only a year ago. The names of Chinese companies came atop in the list specifying the public offerings with largest amounts. Chinese companies prefer mostly Hong Kong and Shanghai, the regions close to their home country. In fact, the situation in general is the same in the world: 90% of companies prefer their home countries for public offering. In BRIC countries 25% of the amount of capital obtained through public offerings in 2007 remained in companies’ home country.

However, in last years there has been an increase in turning to other regions, especially to global finance centers. Companies began to assess all countries and the advantages offered when doing a situation analysis. It is expected that in the coming periods that lively activity will further increase and stock exchanges with established rules and having connections with overseas markets will be preferred more. Indeed, world’s stock markets spend great effort in order to get preferred. For example; largest stock exchanges in the world such as New York, London and NASDAQ initiated their efforts to attract Chinese companies. Following NASDAQ and New York Stock Exchange, London Stock Exchange also opened an office in Beijing. Aiming to attract Chinese companies, England wanted China to remove restrictions on Chinese companies which try to obtain capital in foreign markets. According to Thomson Financial, the amount of public offerings in London Stock Exchange in 2007 was 39.6 billion dollars. Chinese companies accounted for 68 of those public offerings, while only 6 of them got listed on the London Stock Exchange. The amount of public offerings at New York Stock Exchange was 34.6 billion dollars. 

No Foreign Company Listed at the Turkish Stock Exchange

Although the ISE (Istanbul Stock Exchange) breaks records with respect to the number of foreign investors, it is hard to say the same for public offerings of foreign companies. There is even no single foreign company listed on the ISE yet. This situation causes Istanbul to fall behind in the competition just when it aims to become a regional finance center. Actually, the ISE has been chairing the Federation of Euro-Asian Stock Exchanges (FEAS) for along time. Aside from these, there are some projects for establishing cooperation with other countries. However, all these developments can not get foreign companies, even those from the surrounding regions, to get listed on the ISE.  Although there are not foreign companies listed on the ISE yet, there are some Turkish companies which got listed at overseas stock exchanges.

Stocks of such companies as, İş Bankası, Tofaş, Turkcell and Tüpraş are traded at overseas stock markets. In order for a Turkish company to go public at global markets, the shares have to be registered by the SPK (Capital Markets Board). In the past, some holdings which have collected money from investors in other countries giving various promises put many investors in a difficult situation. Those negative developments have shattered the confidence in Turkish companies a lot. Termed as “the green capital” such holdings as; Yimpaş, Kombassan, Endüstri Holding, Büyük Anadolu Holding, ittifak, Kamer, Sayha, Kübra, Kaldera, Jetpa, Aksaray and Apitaş have given hard days to around 300 thousand investors most of whom were Turkish immigrant workers.

 But with the new Draft Turkish Commercial Code, it is aimed to forbid collecting money from people especially outside Turkey, without getting permission from the SPK, in order to set up a joint stock company or to increase capital. In this way, it is expected that abuse of investors will be prevented. Most financial experts say, for Turkish capital markets to become players in global arena foreign companies’ access to the ISE should be definitely provided. While increasing the recognition of the stock exchange in such a way, investors coming to Turkish markets should be given the opportunity to diversify their portfolios regionally. The experts agree on another point; much more Turkish companies should get listed at international markets. The presence of a capital market which can combine all these efforts is expected to bring greater benefits to both investors and companies.