Continued Erosion in Competitiveness of U.S. Public Equity Market was Among the Few...

Continued Erosion in Competitiveness of U.S. Public Equity Market was Among
the Few Clear Trends During 2008 Market Chaos

CAMBRIDGE, Mass., March 24 /PRNewswire/ -- The Committee on Capital Markets
Regulation, an independent and nonpartisan research organization dedicated to
improving the regulation and enhancing the competitiveness of U.S. capital
markets, said today that its Q4 2008 update on the competitiveness of global
capital markets presents evidence of a significant and continued decline in
the attractiveness of the U.S. public equity market for foreign and U.S.
issuers alike.

The Committee's latest analysis of competitiveness was complicated by chaotic
market conditions that distorted some measures. Those factors included a
steep decline in overall global IPO activity in 2008 -- just 92 global IPOs
(those offered by foreign companies outside their home markets) valued at
$20.9 billion compared to 335 worth $95.8 billion in 2007. That is the
biggest decline since the aftermath of the dotcom crash (2001-2003), when the
aggregate value of global IPOs averaged just $10.4 billion annually.

Hal S. Scott, Director of the Committee and Harvard Professor said: "Although
the current financial crisis has distorted some traditional measures, there is
little question that the competitive position of U.S. capital markets
continues to deteriorate."

He noted that U.S. IPO activity in 2008 was even more anemic than global IPO
activity. The 92 global IPOs completed in 2008 represented a 73% decline from
the 335 global IPOs completed in 2007, but the 35 U.S. IPOs completed in 2008
represent an even greater 84% drop from the 220 U.S. IPOs completed in 2007.

In other key conclusions, the Committee found that:

-- U.S. exchanges continued to lose their share of global IPOs. From
1996
to 2006, U.S. stock exchanges attracted 28.7% (by value) of the IPOs
done by foreign companies outside their home markets. By year-end
2008,
that figure had plummeted to 1.9%.

-- None of the largest global IPOs were listed on a U.S. exchange for the
second straight year. In the eleven-year period from 1996 to 2006,
before it fell to zero in full year 2007, the U.S. had a 25% share of
this market, with an average of 5 of the 20 largest global IPOs listed
on a U.S. exchange.

-- The number of IPOs that U.S. issuers have chosen to list abroad rather
than in the U.S. more than double those abroad -- a category all but
unheard of a decade ago -- has skyrocketed. In the seven-year period
from 1996 to 2002, 0.3% of U.S. companies listed their IPOs only on
foreign exchanges. By 2007, that figure had jumped to 8.6%, and in
2008
it rose sharply to 20%, with 7 of the 35 U.S. IPOs being listed only
abroad.

Additionally, the Committee discovered that market chaos has distorted some
traditionally reliable measures. The following measures are misleading and
favor the U.S. public equity market in the latest quarter:

-- U.S. share of global market capitalization (36.0% in 2008 vs. 32.8% in
2007)
-- U.S. share of the value of global share trading (62.4% in 2008 vs. 45%
in 2007)

Far from indicating improvement in the competitive posture of U.S. capital
markets, the above measures largely reflect the wave of sell-offs hitting
smaller non-U.S. equity markets. The Committee also recognized that a big
drop in the percentage of New York Stock Exchange-listed foreign issuers, who
sought to delist their shares in 2008 (down to 5% from 15% in 2007), reflected
the fact that the large number of delistings during 2007 were likely
stimulated by a relaxation of SEC delisting rules that had previously made
delisting much more difficult.

The Committee also noted a rise in the activity of foreign issuers raising
equity through Rule 144A IPOs in the U.S. during 2008. This is also
distorted, as the rise (to about 95% of the total value of global IPOs listed
in the United States in 2008, up from 88% in 2007) may be a reflection of the
near impossibility of getting IPOs done in the current economic climate
rather than an increasing aversion to the U.S. public equity markets.

The Committee found that while its 2008 data must be interpreted in the
context of the low IPO levels amid significant market turmoil, the competitive
position of the U.S. public equity markets does indeed continue to deteriorate
from historical standards. Without major reforms in shareholder litigation,
the regulatory process, and shareholder rights, the Committee predicts that
these adverse trends will continue. Additional regulation of the capital
markets, if done only by the United States and not its competitors, may
further accelerate this trend.

The Committee began tracking 13 separate measures of the competitiveness of
U.S. capital markets on a quarterly basis in December 2007 with its report:
"The Competitive Position of the U.S. Public Equity Market." The 13 measures
fall into five categories: (1) equity raised in public markets; (2) the
relative size of the private Rule 144A and public equity markets in the U.S.;
(3) cross-listings and delistings by foreign companies; (4) trading on U.S.
and non-U.S. stock exchanges; and (5) regional origin of U.S. investment
banking revenue. Historical data through 2008 is now available on the
Committee's website at www.capmktsreg.org.

SOURCE The Committee on Capital Markets Regulation

Prof. Hal S. Scott, Director, Committee on Capital Markets Regulation,
+1-617-384-5364, hscott@law.harvard.edu; or Steve Rose of Hullin Metz & Co.,
mailto:+1-212-752-1044, steve@hmcllc.com