European Companies Flock to US Market for Listing
Flutter Entertainment, the parent company of sports betting giant FanDuel, has joined the growing trend of European companies seeking a primary listing in the US market. Initially debuting as a secondary listing in New York on January 29, Flutter swiftly expressed its intention to transition to a primary listing.
This move mirrors a broader pattern of foreign-domiciled companies gravitating towards the US, with the percentage on the New York Stock Exchange escalating from 18% in 2020 to 25% last year.
Appeal of US Capital Markets
One of the driving forces behind this surge is the attractiveness of the US capital markets, boasting larger institutional followings and a robust culture of retail investing. Additionally, the US has a history of outstanding investment performance. Over the past five years, the S&P 500 has outperformed the MSCI World Index, with a 78% gain compared to MSCI’s 57% in the same period. The gap between the S&P and Europe’s leading indices is even more pronounced.
Success Stories in the US Market
Several European companies, such as German sandal maker Birkenstock and British chip designer Arm Holdings, have witnessed success in the US market. Arm’s shares, for instance, have surged from $63 to around $110 since its IPO in September 2020. Notably, industry giants like BP and Shell are trading at a significant discount relative to their US counterparts in terms of price/earnings ratio. Nevertheless, experts emphasize the importance of metrics like cash flow and return on assets in valuations.
Opportunities and Benefits for European Companies
The appeal of the US market continues to attract European companies seeking enhanced liquidity and exposure to sophisticated investors. Technology and life sciences firms, in particular, stand to benefit from raising capital in the US. Companies like Pearson, the world’s largest educational company, have shown interest in shifting to the US, citing their primary customer base and sales in the country. A US listing also affords the advantage of a larger institutional following and access to a vast pool of retail investors. The convergence of these factors renders the US market an appealing prospect for ambitious European companies.
Analyst comment
Positive news. The US market remains strong and appealing for European companies, especially in technology and life sciences sectors, due to greater liquidity, exposure to sophisticated investors, and access to a larger institutional following and retail investors. This trend is expected to continue, leading to increased success and growth for European companies in the US market.
