Foreign IPOs cash in on record year
Along with U.S. Internet and networking companies, foreign companies also are raising a record amount of money this year through initial public offerings in the United States.
This week,
for example, marks the U.S. market debut of several foreign companies.
i-Cable, a Hong Kong-based cable company owned by Wharf Communications, is seeking to raise up to $218.7 million tomorrow.
Two foreign Internet service providers (ISPs) received a warm reception today when they began public trading.
Terra Networks, an ISP owned by Spain's Telefonica, priced at $13.41 and saw its shares jump as high as 54.50 today before closing at 38.25. Korea's Thrunet also saw its shares jump as high as 51 from an offer price of $18. The shares closed at 35.06.
"We're almost at a record level in terms of money raised by foreign companies doing IPOs in the United States," said Richard Peterson, an IPO analyst with Securities Data. "We're at $10.9 billion now and we're just a deal away from breaking the record in 1997 [of] $11 billion. I think we'll easily pass it before the end of the year."
Foreign companies are attracted by the abundance of capital in the United States and the established markets that cater to young companies, such as the Nasdaq stock market.
Mark Dicioccio, head of Lehman Brothers' West Coast technology group, noted that the growth in foreign companies seeking to tap the U.S. market is a natural step.
As the world's technology demands increase, new companies overseas are setting up shop to take advantage of the boom. As well, venture capital firms based in foreign countries are cropping up to fund those early firms. All this has created an environment where these foreign companies are now ready to go public, Dicioccio noted.
"There is an entire ecosystem here in the United States, from venture capital to IPOs, that has been established for a number of years. These types of dynamics have not been in place for a long time in some countries," Dicioccio said.
Europe, including Israel, is by far the most established region outside of the United States in providing the right environment for new firms. Asia is a close second, because the region is undergoing a technology boom and needs capital, said Dicioccio. Lehman Brothers is the lead underwriter in Korea Thrunet.
Meanwhile, Latin America has fewer entrepreneurial companies, but that is changing, he added.
Telecommunications and Internet companies comprise a large portion of foreign IPOs, reflecting investor demand for such issues, said Cindi Profaca, market strategist with IPO Financial Network.
"People need to realize that the build out of technology is worldwide and that infrastructure is the next big opportunity," Dicioccio said.
Peterson noted the privatization of state-owned telecommunications and electric companies also is contributing to the increase in telecommunications companies hitting U.S. shores.
He added that foreign IPOs accounted for roughly one-sixth of the $60 billion raised this year by companies debuting on U.S. markets.
"The trend will likely continue, barring any unforeseen economic development," he said.