An Introduction to Corporate Finance: Transactions and Techniques, Second Edition

Chapter 4

INTERNATIONAL EQUITY OFFERINGS

Since the mid-1980s, international equity offerings (a new issue of shares offered in several markets simultaneously) have experienced explosive growth. Government privatisation programmes fuelled this growth by increasing interest in equity investment in both developed and emerging markets. As the market evolved, so did the procedures surrounding the launch of an international offering.

 

International equity offerings are a relatively new phenomenon (i.e., since the 1980s). Although companies have raised funds outside their own markets for decades (centuries even), the first co-ordinated, simultaneous offering of shares in a domestic market with a separate international tranche targeted at foreign investors occurred in 1983.

 

This chapter outlines the reasons companies go to the extra effort and expense to sell shares internationally, highlights the key documentation, and describes the marketing and distribution processes used by investment banks in international equity offerings.

RATIONALE FOR INTERNATIONAL OFFERINGS

An issuer can sell shares exclusively to domestic investors or it may decide upon an international offering. The domestic offering is the route chosen for most smaller (i.e., under $100 million) flotations. It is generally cheaper and simpler to complete.

 

However, there are many reasons for an issuer to contemplate accessing international investors in its initial public offering. A broader shareholder base is likely to ...