Home > Business > Press Releases: PR Newswire

Press Releases: PR Newswire

Posted on Wed, Mar. 26, 2008

print email

Resize text

Non-U.S. Company Delistings From NYSE Soared in 2007

By Committee on Capital Markets Regulation

MOST-READ STORIES

WASHINGTON, March 26 --

The New York Stock Exchange's (NYSE) foreign company delisting rate skyrocketed to 15.1% in 2007 from 6.6% in 2006, according to a new study by the Committee on Capital Markets Regulation (CCMR).

The study also found that the dramatic increase in foreign company delistings in 2007 was more than double the average rate of 7.3% in the 10-year period from 1997 to 2006. By contrast, domestic company delisting rates -- which largely reflect mergers -- increased to only 8.0% in 2007 from 5.9% in 2006.

The findings will be discussed at the U.S. Chamber of Commerce's Second Annual Capital Markets Summit: Strengthening U.S. Capital Markets for All Americans, by Hal S. Scott, Nomura Professor, International Financial Systems, Harvard Law School and Director of CCMR.

"It is likely not a coincidence that the new SEC rules permitting deregistration by foreign companies with relatively low U.S. trading volumes became effective June 4, 2007," Prof. Scott said. "Of the 68 foreign companies that delisted in 2007, 50 -- or 74% -- delisted on or after June 4. To a certain extent, the 2007 spike in foreign delistings represents pent-up demand to leave. This pent-up demand, however, is itself a reflection of the unattractiveness of the U.S. public equity market."

The Committee first reported a significant increase in foreign company delistings in its December 4, 2007 report, The Competitive Position of the U.S. Public Equity Market (available at http://www.capmktsreg.org). At that time, the Committee said a record number of foreign companies had delisted from the NYSE as of October 2007.

Since the December report, the Committee has examined the nationality and market valuations of the delisting companies and found that delisting companies were overwhelmingly from Western Europe. Of the 53 companies that delisted not due to an acquisition, 43 were from Western Europe (8 each from the UK and France and 7 from Germany) and 4 were from Australia. Only 5 of the 53 delisting companies were from emerging market countries -- Chile (1), Brazil (1), Hong Kong/China (2) and Israel (1).

Litigation, Poor Regulatory Process Offset Listing Premiums for Many Companies

The Committee also examined the market valuations of the delisting companies using "Tobin's Q" to understand if the U.S. was only losing companies not getting a premium by listing in the U.S. Tobin's Q -- essentially the ratio of a company's market value to the book value of its assets -- measures the listing premium. A Tobin's Q greater than 1 indicates that the market places a value on the company greater than its book value. A Tobin's Q less than 1 indicates that the market places a value on a company less than its book value.