Share
Explore BrainMass

Raising Capital in the Global Economy: US markets, ADRs, Foreign Exchanges

Case Assignment

Background

Despite the global financial crisis foreign companies tend to find it worthwhile to have their shares listed on one of the American stock exchanges. Having a listing brings access to more capital as well as increased prestige. However, there are many hurdles and difficulties involved in getting a foreign company listed on an American stock exchange.

Case Assignment Task

Do your own research on world stock markets. Then write a detailed paper that refers to the following issues:

1. Is raising money in U.S. stock markets more - or less - difficult than in the rest of the world?

2. Is it generally worthwhile for a non-US company to get listed on a U.S. exchange? What are the advantages? What are ADR's?

3. Is it a good move for a U.S. corporation to list its stock on foreign stock exchanges? What are the possible advantages and disadvantages of such a move?

Assignment Expectations:

A case study detailing the issues facing a foreign company wishing to have its shares listed on an American stock exchange and the advantages/disadvantages of US company wishing to list its shares on another country's stock exchange.

Solution Preview

Efficiency of US Stock Market to Raise Money As Compared To the Rest of the World

The U.S stock market has faced various challenges over the past decade with the most recent one being the Great recession of 2008 that started from the bubble in the mortgage market. Currently the stocks on the U.S. market continue falling with investors getting more concerned. As of June 8, 2011, the S&P 500 dropped by 2 points while Dow Jones industrial average and NASDAQ dropped by five points and 12 points respectively. The energy sector was the one that was doing well in this decline with oil prices trading at above $ 100 a 1.5% rise. Benanke acknowledged that the market is producing way below its potential and investment activities would be way below performance. The recent drop in growth in the "housing sector, the job market and manufacturing" has been the main cause for the increased economic woes (CNNMoney, 2011).

Unlike the U.S Stock Exchange, other world stock markets are performing relatively well. For instance the Frankfurt Exchange Listings is most attractive currently especially for companies that want to offer an IPO. About 97.8% of all Initial Public Offerings (IPOs) in the past six months have been placed on the Frankfurt Stock Exchange. Between 2001 and 2008, no company that got listed during an IPO has experienced insolvency (Frankfurt Stock Exchange, 2011). In this respect, the falling stock values in the U.S stock exchange have made it an uphill task for companies to raise money, unlike other stock Markets in the world. Therefore, raising money in the United States Stock Markets is more difficult than in the rest of the ...

Solution Summary

This solution discusses raising capital in US markets compared to the rest of the world, foreign companies listed on US stock exchanges and US companies listed in on foreign stock markets, in approximately 850 words with seven references.

$2.19