Over There
Small companies may have more ready access to capital outside United States borders, at least for now. Overseas capital markets charge much less in fees; while the typical rate in the States amounts to 7 percent of funds raised, for example, fees in the UK are about half that. Companies are taking notice. "Clearly, international capital markets are beginning to develop and are gaining traction as wealth begins to accumulate around the world," says Ken Goldmann, who chairs the SEC practice at accounting firm J.H. Cohn.

The higher fees charged in the United States, says Bartlett, are justified because underwriters here face significantly greater regulation and litigation risk than they do overseas, which drives their prices up. That burden can be a boon to clients: many investors find those stringent regulations and requirements reassuring, and will pay a premium for shares offered in the States that may more than offset the higher underwriting fees. That gap in fee structures may soon disappear if, as seems likely, other countries ratchet up the regulatory burden. But it's worth noting that 24 of the top 25 underwriting deals in 2005 took place overseas.

The London Stock Exchange's AIM, a market geared specifically to small businesses thanks to its light disclosure requirements and regulation, is only one of many markets worldwide that are "trying to take the game away from the U.S.," notes Bartlett. That suggests that some form of competition exists, but if the big players in underwriting are feeling the pressure, they certainly aren't showing it. And few of their clients seem overly interested in turning up the heat.

Rob Garver is a freelance writer based in Springfield, Virginia.

New Specs for SPACs

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