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Continuing Competitive Weakness In U.S. Capital Markets

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SOURCE Committee on Capital Markets Regulation

Committee Study Shows Deepening Aversion to U.S. Capital Markets Through 2013

CAMBRIDGE, Mass., Jan. 31, 2014 /PRNewswire-USNewswire/ -- U.S. capital market competitiveness remained weak through the fourth quarter of 2013, when measures of aversion to U.S. public equity markets remained at levels not seen since the 2007-08 financial crisis.

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"I remain very concerned about the path U.S. capital markets have taken," said Prof. Hal S. Scott, Director of the Committee on Capital Markets Regulation. "Nothing indicates that our capital markets are on the road to competitive recovery."

A number of key measures of market competitiveness showed dramatic declines over previous years, including:

U.S. share of global IPOs by foreign companies sits at 7%, the lowest level since 2008 and a substantial decline from the 11.4% recorded in 2012. This measure remains far below the historical average of 26.8% (1996-2007).

U.S. share of top 20 global IPOs remains depressed, with none of the top 20 global IPOs in 2013 occurring in the U.S. public markets. Along with the low share in 2012 and 2011 (one and three IPOs respectively) this constitutes an extended preference by the most significant new issuers to avoid the U.S. public equity markets.

Foreign companies that did raise equity capital in the United States through the fourth quarter of 2013 did so overwhelmingly via private rather than public markets. Over 89% of initial offerings of foreign equity in the United States were conducted through private Rule 144A offerings rather than public offerings. This measure of aversion to U.S. public equity markets is at its highest level since 2008 and stands significantly higher than the historical average of 66.1% (1996-2007).

U.S. share of global share trading value declined to 42.6% from 47.5% in 2012, well below the historical average of 50.6% (1990-2007). This fourth quarter result continues the alarming concern that the steady erosion in U.S. competitiveness in primary markets is spreading to secondary markets. 

The percentage of IPOs by U.S. issuers listed only abroad increased to 3.3% through the fourth quarter of 2013 after declining to 0.7% in 2012, supporting the view that the 2012 decline was due to the softness of European equity markets in the wake of the recent sovereign debt crisis. The fact that U.S. public issuers are avoiding their natural home market is deeply concerning for the competitiveness of U.S. public market.

The CCMR believes that the policy recommendations in its 2006 Interim Report remain essential to the restoration of U.S. competitiveness. "We urge regulators implementing the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act to minimize the adverse competitive effects of new regulations, particularly in areas where the U.S. regulatory approach differs significantly from competitor markets," said Scott.

Historical data through 2012 are available at www.capmktsreg.org.

For Further Information:
Hal Scott,
Director, Committee on Capital Markets Regulation
617-495-4590
hscott@law.harvard.edu

Founded in 2006, the Committee on Capital Markets Regulation is dedicated to enhancing the competitiveness of U.S. capital markets and ensuring the stability of the U.S. financial system. Our membership includes thirty-three leaders drawn from the finance, investment, business, law, accounting, and academic communities. The Committee is chaired jointly by R. Glenn Hubbard (Dean, Columbia Business School) and John L. Thornton (Chairman, The Brookings Institution) and directed by Hal S. Scott (Nomura Professor and Director of the Program on International Financial Systems, Harvard Law School).

The Committee is an independent and nonpartisan 501(c)(3) research organization, financed by contributions from individuals, foundations, and corporations.

Measure

Historical Average

2008

2009

2010

2011

2012

2013*









1.     U.S. Share of Equity Globally Raised in Public Markets

1996-2007: 31.1%

23.6%

24.6%

30.0%

42.7%

49.8%

40.1%

2.     U.S. Share of Global IPOs by Foreign Companies (Broad Definition, By Value)

1996-2007: 26.8%

1.9%

16.9%

14.2%

8.6%

11.4%

7.0%

3.     U.S. Share of 20 Largest Global IPOs

1996-2007: 4 of 20

0 of 20

2 of 20

1 of 20

3 of 20

1 of 20

0 of 20

4.     Rule 144A IPOs by Foreign Companies as % of Total Global IPOs in the U.S.
(By Value)

1996-2007: 66.1%

95.5%

70.2%

79.3%

82.5%

84.5%

89.0%

5.     % of IPOs by U.S. Issuers Listed Only Abroad

1996-2007: 1.9%

20.0%

3.0%

5.2%

6.9%

0.7%

3.3%

6.     Equity Raised in the U.S. by Foreign Issuers via Rule 144A BONY ADRs

2000-2007: $2.5 bn

$308 mn

$738 mn

$771 mn

$1.323bn

$3.57bn

$1.51bn

7.     Equity Raised via Rule 144A ADRs as a % of Equity Raised by Foreign Issuers in the U.S Public Market

2000-2007: 10.6%

5.0%

4.1%

3.8%

6.3%

26.5%

5.7%

8.     No. of Foreign Companies Cross-Listings in the U.S.

2000-2007: 17

3

5

7

11

9

9

9.     % of Foreign Companies Delisting from the NYSE

1997-2007: 6.3%

5.0%

4.2%

6.0%

5.8%

5.3%

6.0%

10.  U.S. Share of Global Market Capitalization

1990-2007: 42.7%

36.0%

32.4%

31.5%

33.0%

35.0%

37.9%

11.  U.S. Share of the Value of Global Share Trading

1990-2007: 50.6%

58.2%

50.2%

48.3%

48.8%

47.5%

42.6%

12.  ADR Trading Volumes as a % of Ordinary Share Trading Volumes in Home Markets

2001-2007: 17.9%

18.3%

18.5%

22%

20.9%

11.0%

47.8%

13.  U.S. % of Global Total of M&A Advisory and Equity/Debt Capital Market Underwriting Revenue by Client-Parent Nationality

1996-2007: 49%

41%

37%

40%

40%

45%

47%









* Through Q4 unless noted








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