VideoGiven the beating that global stock markets have been taking and the near-moratorium on initial public offerings, some American finance chiefs may be tempted to give up pursuing international equity altogether. But not World Wrestling Entertainment Inc. CFO August Liguori.
The Stamford, Connecticut-based company went public on Nasdaq three years ago and moved to the New York Stock Exchange two years ago. Now, Liguori is adding the possibility of a European equity offering to the company's long-term growth plan. Ideally, a listing will land the company on the "most global" and "prestigious" stock exchange in Europe, as a natural complement to WWE's international sales expansion strategy. "We find that when portfolio managers see the power of the brand being demonstrated [and get to] meet and greet the talent," he says, "they become pretty substantial investors. In the long term, we're hoping to replicate that kind of activity around the globe."
Exactly which European exchange will be the most global and prestigious when Liguori is ready, though, is an open question. After decades as member-owned fiefdoms separated by high cross-border trading fees, varying listing requirements, and unconnected clearing and settlement processes, "exchanges are becoming more like businesses," says Cornell University finance professor and American Finance Association president Maureen O'Hara. Nine exchanges, including the London Stock Exchange (LSE) and Germany's Deutsche Boerse, are now publicly traded companies, she says, and most other exchanges are looking to pump up their volumes through alliances, mergers, and acquisitions. The introduction of the euro as well as governmental efforts to standardize listing requirements and accounting rules across the continent by 2005 are only intensifying the race to be biggest and best.
Where the Action Is
To be sure, the major exchanges have already taken some significant steps toward a Pan-European securities market. Bourses in Paris, Amsterdam, Brussels, Warsaw, and Lisbon have all come together under the Euronext name in the past two years, "a wildly successful effort," according to O'Hara. Nasdaq, meanwhile, recently purchased a 50 percent stake in Nasdaq Deutschland AG, the product of the newly combined Berlin and Bremen exchanges, with the hope of complementing its still-struggling Nasdaq Europe. For its part, the Deutsche Boerse, owner of the Frankfurt Exchange, is pursuing a vertical-integration strategy: buying up the technology that settles and clears the trades to give it some control over where the new borders are drawn.
Also in the mix are some 20 new exchanges, including Athens's year-old NEXA Market, that have emerged since 1995, aiming to be Europe's version of Nasdaq. The result, says Gerry Beaney, partner in Grant Thornton LLP's London office, is that Europe has become a continent with "too many markets regulated in too many different ways and trapped by varying degrees of red tape, language barriers, and cost." And, he predicts, "the exchanges will have to consolidate to survive."
The big prize, of course, is the LSE. The exchange has already been courted by the Deutsche Boerse, Sweden's Stockholm Stock Exchange, and Nasdaq, and experts predict that one of these suitors--or another--might soon be successful in sealing a deal.
In the meantime, though, the LSE is trying to bring the world to itself by going straight to international companies that are looking to list, with the U.S. market a top priority. Boasting that "almost twice as much international trading [is] reported by firms in London than on Nasdaq, [the] NYSE, Euronext, and the Deutsche Boerse combined," the LSE has run two marketing tours in the United States so far, and is planning up to five more by next March. "Up until the end of last year, we were quite reactive. We've now actually hired people to go out and see if there are U.S. companies that would be interested in a secondary listing," says Charlotte Crosswell, head of North American business development for the LSE.
At press time, the LSE was in talks with between 20 and 30 American companies, mostly in the health-care and oil-and-gas sectors. It currently counts 8 U.S. companies on its small-cap Alternative Investment Market (5 of which have listed this year) and 53 on its main exchange.
Why such interest? "Sometimes it's just a stamp of approval, to be able to say, 'We're listed in euros,'" says Crosswell. But "some companies are saying, 'We're not raising all the money we want to in the U.S.,' and many of them are simply wanting to widen their shareholder base, since they are deriving more of their revenues from Europe."
Reasons for Listing
Indeed, those are the classic reasons any American company would want to consider dual listing. And the bigger and more liquid foreign exchanges get, the more critical it is for U.S. companies to look outside New York, says O'Hara. Now that the exchanges "are more competitive," she says, "where to list becomes a strategic issue for U.S. companies. They have to decide: 'Who do we want our investors to be, and how do we make our stock more attractive to them?'"
Experts caution that there also needs to be a sound business reason. "The first question any investor will ask is: 'Why can't they raise the money in their home market?'" says Grant Thornton's Beaney. "You have to have a good story, like trying to sell in an overseas market or having an investor base that's already there."
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