Deutsche Börse Most Attractive Listing Venue in an International Comparison
Study confirms that Frankfurt offers highest liquidity and lowest capital costs/ Considerable IPO potential among German SMEs
Deutsche Börse offers companies the lowest capital costs among the world’s leading stock exchanges. This is the conclusion reached by an independent study presented by Professors Christoph Kaserer (Munich’s Technische Universität ) and Dirk Schiereck (European Business School ) at the German Equity Forum on Monday. Deutsche Börse offers the lowest capital costs in all three segments - Prime, General and Entry Standard - for both the actual IPO and for ongoing listing. Liquidity on the Frankfurt stock exchange is also higher than at the other trading venues.
The study confirms the results of a survey published by the professors last year. The current study compares the terms and conditions that apply to a listing with Deutsche Börse with those on the following exchanges: Euronext, Hong Kong Stock Exchange, London Stock Exchange, Nasdaq and the New York Stock Exchange. A total of over 2,200 IPOs were examined over the period from January 1999 until March 2007.
The attractiveness of the various exchanges for issuers was analyzed using a valuation system developed by the professors, which is based on eight criteria. These parameters measure a number of factors including the costs of market access, the subsequent costs for further capital increases and liquidity. With an overall score of 2.0, Deutsche Börse’s Prime Standard and General Standard come in 1st compared to the other main markets, followed by Hong Kong’s Main Board (2.9), the NYSE Large Caps (3.0), Euronext’s Eurolist (3.1), the LSE’s Main Market (3.4) and Nasdaq’s Large Caps (3.5). As far as the alternative markets are concerned, the Entry Standard is in pole position with an overall score of 1.9. It is followed by the NYSE Small Caps with a score of 2.6, Euronext’s Alternext (2.8), the Nasdaq Small Caps (3.0), the LSE’s AIM (3.4) and the Hong Kong Growth Enterprise Market (GEM) (3.5).
The total costs of an IPO in Frankfurt average 8.3 percent of the issue volume. Deutsche Börse offers significantly lower overall costs than Nasdaq (9.5 percent), London (12.6 percent) and Hong Kong (14.6 percent). The zero-trade ratio (ZTR) was also examined. This parameter shows the ratio of days without trading in a particular share to the trading days. A low ZTR means that trading activity is high. The study shows that Frankfurt has the highest liquidity in an international comparison, both among the main markets and in the alternative segment. The ZTR in the Prime Standard and the General Standard, as well as in the Entry Standard, comes in at 1.39 percent. By means of comparison, London’s Main Market scores 9.15 percent and its AIM 39.89 percent, while Hong Kong’s GEM also returns a far higher ratio with 33.42 percent.
Frankfurt’s Entry Standard also offers the lowest spreads, i.e. the difference between the buy and sale price, with 2.23 percent, compared with 4.15 percent on the GEM, 4.52 percent on Alternext and 7.22 percent on the AIM. The Prime Standard and General Standard also offer extremely low spreads at 0.62 percent, followed by Eurolist (0.71 percent), Nasdaq (0.74 percent), Hong Kong’s Main Board (1.04 percent) and the LSE’s Main Market (2.0 percent).
“The results of this independent study once again confirm Frankfurt’s attractiveness as a listing venue in a global comparison – for small, medium-sized and large companies alike”, said Rainer Riess, Managing Director, Cash Market Development at Deutsche Börse.
Deutsches Aktieninstitut presented a study on German listings at the Equity Forum. German SMEs show considerable potential for future IPOs. This is the main conclusion reached by a survey performed by Deutsches Aktieninstitut in cooperation with Deutsche Börse AG. All in all, around one quarter of the companies surveyed are either aiming to go public, or are at least considering an IPO in principle. “Compared to 2003, when we published the results of a similar survey, SMEs have increased their capital market focus considerably”, said Rüdiger von Rosen, Head of Deutsches Aktieninstitut. This is an encouraging sign for the acceptance of equities as a financing instrument.
Deutsche Börse and KfW Mittelstandsbank have been organizing the German Equity Forum twice annually since 1996. With over 5,000 participants, the German Equity Forum is one of the major capital market conferences for companies seeking equity financing.
For Further information on listing in Frankfurt contact www.mergerlawassociates.com
Thursday, January 13, 2011
Sunday, January 9, 2011
Considering SOX in Choosing the OTCBB or Frankfurt Exchange
One of the considerations that must be taken into account when deciding on the best facility to go public is the additional administration and cost of complying with the Sarbanes-Oxley Act (SOX) in the U.S. The Sarbanes-Oxley Act of 2002 is legislation enacted in response to the high-profile Enron and WorldCom financial scandals to protect shareholders and the general public from accounting errors and fraudulent practices in the enterprise.
The Sarbanes-Oxley Act, is composed of eleven sections. The 6 main objectives of the Sarbanes-Oxley Act are as follows:
To ensure that auditors remain independent;
Corporations and auditors are accountable to the public for the numbers they publish;
An independent body governs financial reporting processes;
Sufficient measures are in place to deter fraudulent activity;
Financial activities are transparent enough to allow fraud detection to occur;
And if fraud is detected, someone is held responsible.
The 11 Sections of Sarbanes-Oxley are summarized as follows:
Title I – Public Company Accounting Oversight Board
Establishes the Public Company Accounting Oversight Board. As its name implies, the oversight of auditing firms was shifted from self-regulation to PCAOB oversight. Firms that prepare or issue audit reports for publicly traded companies must register with the PCAOB and are subject to inspection. There are currently over 1,800 auditing firms registered. The PCAOB also sets auditing standards, and investigates and disciplines firms not in compliance with the SOX Act.
Title II – Auditor Independence
Serves to limit potential conflicts of interests for auditing firms. For example, it prohibits auditors from performing much more lucrative consulting services for the companies they audit. It also includes requirements for new auditors and audit partner rotations.
Title III – Corporate Responsibility
Focuses on corporate responsibility for a company’s financial reports, and decrees that a company’s audit committee be independent of and oversee the work of its accounting firm. It further requires that corporate officers attest to the integrity of the company’s financial reports. The section also prohibits insider trading during pension fund blackout periods Sarbanes-Oxley.
Title IV – Enhanced Financial Disclosures
Regulates many of the shady accounting practices that led to the downfall of companies like Enron, Adelphia, and WorldCom, such as off-balance sheet transactions, pro forma figures, and personal loans to executives. Section 404 of Title IV is often cited as the most significant aspect of The SOX Act, and as the most costly provision to implement. Section 404 mandates that auditors submit an annual management report that gauges the efficacy of a company’s internal controls, as well as a second report from management and auditors that assesses internal controls over financial reporting.
Title V – Analyst Conflicts of Interest
Outlines the disclosure requirements for securities analysts, who may have conflicts of interest that preclude them from objectively making recommendations to their clients and to the public.
Title VI – Commission Resources and Authority
Gives the SEC the authority to censure stock brokers and advisors or prevent them from engaging in their professions. It also authorizes the courts to restrict the ability of brokers to offer penny stocks.
Title VII – Studies and Reports
Orders the Government Accountability Office to study the consolidation of public accounting firms and the impact these mergers have on the ability of firms to conduct impartial audits, as well as to provide solutions to problems that may emerge in its findings. It also provides for the study of credit rating agencies and investment banks, as well as for the study of securities professionals (including accountants and investment bankers) who have violated Federal securities laws.
Title VIII – Corporate and Criminal Fraud Accountability
Addresses criminal penalties for specific acts of corporate fraud – including destruction, alteration, or falsification of corporate records, and defrauding shareholders – and reviews the Federal sentencing guidelines for obstruction of justice and extensive criminal fraud. It also includes whistleblower protections for employees of publicly traded companies.
Title IX – White Collar Crime Penalty Enhancements
Includes enhanced sentencing guidelines for those that engage in corporate malfeasance and mandates that failure to certify corporate financial reports is a crime. Gives the SEC the authority to seek court freeze of extraordinary payments to directors, partners and other employees.
Title X – Corporate Tax Returns
Dictates that the CEO of a company must sign the company’s Federal income tax return.
Title XI – Corporate Fraud and Accountability
Empowers the SEC to petition a Federal court to freeze payments about to be made to corporate officers, directors, or employees during a fraud or securities violation investigation. In addition, the SEC can prohibit a person from serving as an officer or director of a public company. Sarbanes-Oxley.
OTCBB listed companies must comply with many of the requirements of Sarbanes Oxley rules. Under SOX, the CEO and CFO of a public corporation are required to personally certify and sign off on the financial statements. They become personally responsible for the accuracy of the statements and that there are no material errors or materially misleading information contained therein.
One of the most controversial areas has been with Section 404b, which requires companies to assess their own internal controls over financial reporting and to obtain an independent auditor’s assessment regarding the effectiveness of such controls. In short, this is an extremely onerous undertaking, incurring significant internal and external labor which can be a material disincentive to going public in the U.S. Companies with market capitalizations. To date, there have been exemptions for smaller cap companies (less than $75 million in market capitalization).
Interestingly, the argument for and against extension of section 404 to smaller cap companies is much like a catch 22 scenario. It is estimated that over 90% of public companies fall under the small cap exemption for this rule. It has been argued that these smaller companies are exactly the ones that need better financial controls due to their relative lack of resources and the theoretical risk of fraud given the weaker controls in place. However, the cost of compliance is truly onerous on smaller companies, especially micro-cap and smaller entities, and they are not in a position to afford compliance easily.
However, there is also limited risk to the public of the negative impact of a massive fraud, as these smaller companies represent only 20% of the total market, therefore limiting the impact of a major fraud, should it occur.
The argument can also be made that the massive frauds that led to SOX in the first place occurred in very large companies, not small cap companies, and were exacerbated by C level executives, if not necessarily directed by them in an overt manner.
Small cap companies are also not under the same level of public scrutiny and pressure to achieve short term results as are larger cap companies – thus reducing the pressure to ‘cook the books’ to meet market expectations.
At Merger Law Associates, our opinion is that these smaller cap companies will be less susceptible to major fraud, as the signing officers are in a better position to know if there is something not quite kosher in their financial statements. The requirement for them to personally certify the accuracy of the financial statements coupled with the significant penalties should there be material defects in the statements would seem to be enough deterrent to ensure their accuracy.
From the big picture analysis, Merger Law Associates takes the position that choosing the Frankfurt Exchange, which does not require the expensive compliance of SOX is often a better choice for smaller cap companies seeking to go public.
Find out more at our website www.mergerlawassociates.com
The Sarbanes-Oxley Act, is composed of eleven sections. The 6 main objectives of the Sarbanes-Oxley Act are as follows:
To ensure that auditors remain independent;
Corporations and auditors are accountable to the public for the numbers they publish;
An independent body governs financial reporting processes;
Sufficient measures are in place to deter fraudulent activity;
Financial activities are transparent enough to allow fraud detection to occur;
And if fraud is detected, someone is held responsible.
The 11 Sections of Sarbanes-Oxley are summarized as follows:
Title I – Public Company Accounting Oversight Board
Establishes the Public Company Accounting Oversight Board. As its name implies, the oversight of auditing firms was shifted from self-regulation to PCAOB oversight. Firms that prepare or issue audit reports for publicly traded companies must register with the PCAOB and are subject to inspection. There are currently over 1,800 auditing firms registered. The PCAOB also sets auditing standards, and investigates and disciplines firms not in compliance with the SOX Act.
Title II – Auditor Independence
Serves to limit potential conflicts of interests for auditing firms. For example, it prohibits auditors from performing much more lucrative consulting services for the companies they audit. It also includes requirements for new auditors and audit partner rotations.
Title III – Corporate Responsibility
Focuses on corporate responsibility for a company’s financial reports, and decrees that a company’s audit committee be independent of and oversee the work of its accounting firm. It further requires that corporate officers attest to the integrity of the company’s financial reports. The section also prohibits insider trading during pension fund blackout periods Sarbanes-Oxley.
Title IV – Enhanced Financial Disclosures
Regulates many of the shady accounting practices that led to the downfall of companies like Enron, Adelphia, and WorldCom, such as off-balance sheet transactions, pro forma figures, and personal loans to executives. Section 404 of Title IV is often cited as the most significant aspect of The SOX Act, and as the most costly provision to implement. Section 404 mandates that auditors submit an annual management report that gauges the efficacy of a company’s internal controls, as well as a second report from management and auditors that assesses internal controls over financial reporting.
Title V – Analyst Conflicts of Interest
Outlines the disclosure requirements for securities analysts, who may have conflicts of interest that preclude them from objectively making recommendations to their clients and to the public.
Title VI – Commission Resources and Authority
Gives the SEC the authority to censure stock brokers and advisors or prevent them from engaging in their professions. It also authorizes the courts to restrict the ability of brokers to offer penny stocks.
Title VII – Studies and Reports
Orders the Government Accountability Office to study the consolidation of public accounting firms and the impact these mergers have on the ability of firms to conduct impartial audits, as well as to provide solutions to problems that may emerge in its findings. It also provides for the study of credit rating agencies and investment banks, as well as for the study of securities professionals (including accountants and investment bankers) who have violated Federal securities laws.
Title VIII – Corporate and Criminal Fraud Accountability
Addresses criminal penalties for specific acts of corporate fraud – including destruction, alteration, or falsification of corporate records, and defrauding shareholders – and reviews the Federal sentencing guidelines for obstruction of justice and extensive criminal fraud. It also includes whistleblower protections for employees of publicly traded companies.
Title IX – White Collar Crime Penalty Enhancements
Includes enhanced sentencing guidelines for those that engage in corporate malfeasance and mandates that failure to certify corporate financial reports is a crime. Gives the SEC the authority to seek court freeze of extraordinary payments to directors, partners and other employees.
Title X – Corporate Tax Returns
Dictates that the CEO of a company must sign the company’s Federal income tax return.
Title XI – Corporate Fraud and Accountability
Empowers the SEC to petition a Federal court to freeze payments about to be made to corporate officers, directors, or employees during a fraud or securities violation investigation. In addition, the SEC can prohibit a person from serving as an officer or director of a public company. Sarbanes-Oxley.
OTCBB listed companies must comply with many of the requirements of Sarbanes Oxley rules. Under SOX, the CEO and CFO of a public corporation are required to personally certify and sign off on the financial statements. They become personally responsible for the accuracy of the statements and that there are no material errors or materially misleading information contained therein.
One of the most controversial areas has been with Section 404b, which requires companies to assess their own internal controls over financial reporting and to obtain an independent auditor’s assessment regarding the effectiveness of such controls. In short, this is an extremely onerous undertaking, incurring significant internal and external labor which can be a material disincentive to going public in the U.S. Companies with market capitalizations. To date, there have been exemptions for smaller cap companies (less than $75 million in market capitalization).
Interestingly, the argument for and against extension of section 404 to smaller cap companies is much like a catch 22 scenario. It is estimated that over 90% of public companies fall under the small cap exemption for this rule. It has been argued that these smaller companies are exactly the ones that need better financial controls due to their relative lack of resources and the theoretical risk of fraud given the weaker controls in place. However, the cost of compliance is truly onerous on smaller companies, especially micro-cap and smaller entities, and they are not in a position to afford compliance easily.
However, there is also limited risk to the public of the negative impact of a massive fraud, as these smaller companies represent only 20% of the total market, therefore limiting the impact of a major fraud, should it occur.
The argument can also be made that the massive frauds that led to SOX in the first place occurred in very large companies, not small cap companies, and were exacerbated by C level executives, if not necessarily directed by them in an overt manner.
Small cap companies are also not under the same level of public scrutiny and pressure to achieve short term results as are larger cap companies – thus reducing the pressure to ‘cook the books’ to meet market expectations.
At Merger Law Associates, our opinion is that these smaller cap companies will be less susceptible to major fraud, as the signing officers are in a better position to know if there is something not quite kosher in their financial statements. The requirement for them to personally certify the accuracy of the financial statements coupled with the significant penalties should there be material defects in the statements would seem to be enough deterrent to ensure their accuracy.
From the big picture analysis, Merger Law Associates takes the position that choosing the Frankfurt Exchange, which does not require the expensive compliance of SOX is often a better choice for smaller cap companies seeking to go public.
Find out more at our website www.mergerlawassociates.com
Monday, January 3, 2011
Take your company public on OTCBB and Frankfurt
Take your company public on OTCBB and Frankfurt
Entrepreneurs are being turned onto Regulation D in droves. Regulation D Rule 504, 505 and 506 allow companies a more lenient fund raising process than those who choose to go public by other means. In the past year I’ve seen more PPM consultants pop up on the internet than ever before and I have to admit I’m concerned. As a veteran in this field I’ve seen it all, now we have a legion of self proclaimed Reg. D gurus who buy templates, add some text and tell their clients that they are delivering a customized offering memorandum; here’s where things go bad and a difficult situation gets even worse. You have this worthless document, now what?
You need to gain the confidence and capital of accredited investors without soliciting as dictated in Regulation D Rule 502c. Now you have a worthless document that you can’t solicit investment capital for (which your guru consultant never told you but took your cash anyway) so how are you suppose to raise funds for your company? First, you’ll find that you’ll eventually need to make your way to an actual PPM author, not a broker so that you can get a PPM that protects you from lawsuits and gives the investor a real breakdown of the upside and downside of your business.
Next you’ll need to find a “Investor Finder”, yes this is an actual term for an individual or corporate entity that is completely submerged in the accredited investor realm and is able to match your opportunity with friends that he/she has in their database of real, accredited investors. This is the second half of the PPM equation.
Don’t kid yourself and don’t allow yourself to be lied to; you’re going to need a seasoned professional to help introduce you to investors that have the capital to help you get to where you need to be. Friends, family and employees will commit to investing in your company until your PPM is completed and it’s time to make good on their commitment; all of a sudden little Johnny needs braces and Sally is in the hospital with pneumonia, this happens all the time. Now what? With a real Private Placement Memorandum and a solid Investor Finder you’re problems are basically over. Investigate where the author and I.F. stand in the Internet public domain and after you find a company that meets your needs, get moving and start raising capital.
The internet tells all when it comes to reputations, you’ll be able to tell the difference between a seasoned veteran and a startup consultant after on Google Search and a phone call. A PPM can make raising capital quick and easy if you have the right firm in your corner.
Want to find out more about Taking Your Company Public, then visit Merger Law Associates site on how to choose between a Reverse Merger or S1 Filing for the best results
Entrepreneurs are being turned onto Regulation D in droves. Regulation D Rule 504, 505 and 506 allow companies a more lenient fund raising process than those who choose to go public by other means. In the past year I’ve seen more PPM consultants pop up on the internet than ever before and I have to admit I’m concerned. As a veteran in this field I’ve seen it all, now we have a legion of self proclaimed Reg. D gurus who buy templates, add some text and tell their clients that they are delivering a customized offering memorandum; here’s where things go bad and a difficult situation gets even worse. You have this worthless document, now what?
You need to gain the confidence and capital of accredited investors without soliciting as dictated in Regulation D Rule 502c. Now you have a worthless document that you can’t solicit investment capital for (which your guru consultant never told you but took your cash anyway) so how are you suppose to raise funds for your company? First, you’ll find that you’ll eventually need to make your way to an actual PPM author, not a broker so that you can get a PPM that protects you from lawsuits and gives the investor a real breakdown of the upside and downside of your business.
Next you’ll need to find a “Investor Finder”, yes this is an actual term for an individual or corporate entity that is completely submerged in the accredited investor realm and is able to match your opportunity with friends that he/she has in their database of real, accredited investors. This is the second half of the PPM equation.
Don’t kid yourself and don’t allow yourself to be lied to; you’re going to need a seasoned professional to help introduce you to investors that have the capital to help you get to where you need to be. Friends, family and employees will commit to investing in your company until your PPM is completed and it’s time to make good on their commitment; all of a sudden little Johnny needs braces and Sally is in the hospital with pneumonia, this happens all the time. Now what? With a real Private Placement Memorandum and a solid Investor Finder you’re problems are basically over. Investigate where the author and I.F. stand in the Internet public domain and after you find a company that meets your needs, get moving and start raising capital.
The internet tells all when it comes to reputations, you’ll be able to tell the difference between a seasoned veteran and a startup consultant after on Google Search and a phone call. A PPM can make raising capital quick and easy if you have the right firm in your corner.
Want to find out more about Taking Your Company Public, then visit Merger Law Associates site on how to choose between a Reverse Merger or S1 Filing for the best results
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