Taking Your Company Public -- But Not in America

By Carol Tice

There's been much chatter in investment circles about how many foreign companies have gone public on U.S. stock exchanges in the past year -- 21 of the 154 companies that have gone public so far this year hail from China, PricewaterhouseCoopers reports. But less has been said about the reverse trend -- American startups going public on foreign exchanges.

As it happens, I had a local company here in Seattle do just that earlier this year -- HaloSource, which makes safe-drinking-water technology. Back in October, the Bothell-based company raised $80 million on the AIM exchange in London.

Going public on a foreign exchange has some allure right now since the domestic IPO market, while recovering, is still a pretty tough neighborhood for startups especially. So the AIM in particular -- which is intended specifically for "smaller growing companies," has a distinct allure.

One feature many companies may find appealing about going overseas: Since the stock is not registered in the U.S., the company does not have to reveal their finances to anyone here at home...though there are workarounds if a person is really dying to get their hands on your numbers. A Seattle Times editor didn't have too much trouble digging up the news that HaloSource made $11.8 million last year, and was expecting 40 percent growth or more in 2010.

Growth was only 18 percent in the past year, raising questions about whether such rapid growth was achievable. Guess investors abroad will find out when the company releases their 2010 numbers...only in Europe.

Dark side: Your company cannot sell the stock to any U.S. investors, as the shares are not registered here. Without anyone in your hometown crowd buying shares, it may be harder for you to find enough investors to support an overseas IPO.

If you have overseas venture-capital backers, though, they may have the connections to make a foreign IPO work for you. A company could use money from an IPO on AIM or another foreign exchange to grow, and then perhaps move to a U.S. exchange. Having already been public, a company might be more ready for the scrutiny of the U.S. Securities and Exchange Commission -- and might be a little bigger and more interesting to domestic investors.

Are you considering an IPO for your company? If so, would you use a foreign exchange? Leave a comment and tell us your thoughts about doing an IPO abroad.

Photo via stock.xchng user svilen001