Why trade on OTC Markets if you are a European company
Listing the stock of a European company on Wall Street is much easier than it seems; and for dynamic, early-stage, or high-growth companies, having access to U.S. investors can make a big competitive difference. OTC Markets Group, the regulated market operator for trading over 12,000 U.S. and international securities, is the ideal route for that.
Wall Street is the heart of global finance; its regulatory system offers greater levels of transparency, and access to a large number of other, less risk-averse and more dynamic investors. This is what, for example, many technology companies and start-ups in the critical growth phase need, especially as a less dilutive alternative to venture capital deals. Above all, trading in the U.S. capital markets offers the highest level of global visibility for any company with even the slightest international vocation.
In recent years, going public in the U.S. has been dramatically simplified. Companies listed on qualified foreign exchanges in Europe, determined by OTC Markets Group, (including Madrid’s Main Market or Euronext, or Luxembourg Stock Exchange or Borsa Italiana) can cross-trade on OTC Markets simply by utilizing the foreign private issuer exemption 12g3-2(b) – the SEC exemption which allows companies to make their home country disclosure publicly available in English, in lieu of SEC reporting.
OTC Markets is, in fact, the first port of call for European companies seeking investors there, normally through a dual-listing process. A modern trading platform and the gateway for thousands of global companies to the North American investment market. The premium OTCQX Market encompasses a diverse range of industry leaders, global powerhouses, established U.S. community banks, dividend-paying companies, and market innovators from over 25 countries—from multinationals such as Adidas, Roche, or Axa S.A. It has become the trading platform of choice for companies from Spain, France, Germany, South Africa, and many other corners of the world.
OTC Markets Group operates the largest market in the United States for public companies which have their primary listing outside the United States and offers an international presence on a path that others in Spain have already walked. Take Spain’s Lleida.net, which started trading on the MAB in 2015, and is now listed in Madrid, Paris, and New York, or Repsol, whose shares have been trading on OTC Markets for years.
Albeit relatively unknown, many European mega-caps and household names such as Repsol, Heineken, Roche, Danone, and BNP Paribas have selected the premium tier of the market OTCQX to be their U.S trading venue to access investors in the U.S. In January 2021, the USD volume traded on OTC Markets was over $53 billion, and so there is no shortage of interest for companies that trade on the OTC market.
And, cases such as that of Lleida.net, in 2020, have shown that trading in the U.S., and on the OTCQX Market, demonstrates that your company is both compliant with U.S. securities laws and enhances corporate governance amongst the broader U.S. investment and broker community. Additionally, U.S. ownership increases significantly— a study by Oxford Metrica demonstrated a 26% increase in home market liquidity when a company joins OTCQX. US investors also have a larger appetite for investment which may lead to increased valuation and allow for global recognition, higher levels of liquidity, and attention from funds, retailers, analysts, as well as the financial media.
Historically, in a market like Spain’s, going public was something of a Herculean task, something reserved for Greek tragedies and the times of gods and heroes. Listing was an enterprise that relevant companies could only do after a painstaking and unending process. Not to mention the costs of the process and the complex reporting and investor information requirements. A reality that corresponds to the Spanish stock market and a large part of the European stock markets.
This is not to imply that it is not essential to have a presence in local markets. Instead, we would argue that, given the ability to access international markets, issuers should consider a cross-trading strategy from their home market and increase their exposure to many types of investors, markets, and countries.
In the year 2022, and in a macroeconomic, global environment where everything affects us all, ringing the bell is no longer the consequence of a magic potion that seems impossible and within reach of a few. Instead, there is a route to having a public quote in U.S. dollars for U.S. investors during U.S. market hours.
On both its premium OTCQX and OTCQB Markets, OTC represents the best conduit to take the leap across the pond and ride the road to investor recognition in the U.S. This is a compliant, cost-efficient and light-touch way of opening the doors to the U.S. investment community—especially if the desired outcome is to eventually position oneself for strategic opportunities ahead.
Because in a post-pandemic world, having broader access to U.S. investors can make a tremendous impact.
— Ramón Pedrosa, Founder, PedrosaTM
Read other recent posts on accessing U.S. investors.
